Correlation Between Vipshop Holdings and LL Flooring

Can any of the company-specific risk be diversified away by investing in both Vipshop Holdings and LL Flooring at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vipshop Holdings and LL Flooring into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vipshop Holdings Limited and LL Flooring Holdings, you can compare the effects of market volatilities on Vipshop Holdings and LL Flooring and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vipshop Holdings with a short position of LL Flooring. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vipshop Holdings and LL Flooring.

Diversification Opportunities for Vipshop Holdings and LL Flooring

-0.11

Correlation Coefficient

Vipshop Holdings  LL Flooring

Good diversification

The 3 months correlation between Vipshop and LL Flooring is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and LL Flooring Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LL Flooring Holdings and Vipshop Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vipshop Holdings Limited are associated (or correlated) with LL Flooring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LL Flooring Holdings has no effect on the direction of Vipshop Holdings i.e., Vipshop Holdings and LL Flooring go up and down completely randomly.

Pair Corralation between Vipshop Holdings and LL Flooring

Given the investment horizon of 90 days Vipshop Holdings Limited is expected to generate 0.79 times more return on investment than LL Flooring. However, Vipshop Holdings Limited is 1.26 times less risky than LL Flooring. It trades about 0.07 of its potential returns per unit of risk. LL Flooring Holdings is currently generating about -0.08 per unit of risk. If you would invest  701.00  in Vipshop Holdings Limited on January 31, 2024 and sell it today you would earn a total of  888.00  from holding Vipshop Holdings Limited or generate 126.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Vipshop Holdings Limited  vs.  LL Flooring Holdings

Vipshop Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vipshop Holdings Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vipshop Holdings is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

LL Flooring Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LL Flooring Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Vipshop Holdings and LL Flooring

The main advantage of trading using opposite Vipshop Holdings and LL Flooring positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vipshop Holdings position performs unexpectedly, LL Flooring can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in LL Flooring will offset losses from the drop in LL Flooring's long position.

The idea behind Vipshop Holdings Limited and LL Flooring Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.