Correlation Between Vipshop Holdings and Rakuten
Can any of the company-specific risk be diversified away by investing in both Vipshop Holdings and Rakuten 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 Rakuten 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 Rakuten Inc ADR, you can compare the effects of market volatilities on Vipshop Holdings and Rakuten 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 Rakuten. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vipshop Holdings and Rakuten.
Diversification Opportunities for Vipshop Holdings and Rakuten
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vipshop and Rakuten is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and Rakuten Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rakuten Inc ADR 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 Rakuten. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rakuten Inc ADR has no effect on the direction of Vipshop Holdings i.e., Vipshop Holdings and Rakuten go up and down completely randomly.
Pair Corralation between Vipshop Holdings and Rakuten
Given the investment horizon of 90 days Vipshop Holdings Limited is expected to generate 1.33 times more return on investment than Rakuten. However, Vipshop Holdings is 1.33 times more volatile than Rakuten Inc ADR. It trades about 0.06 of its potential returns per unit of risk. Rakuten Inc ADR is currently generating about -0.01 per unit of risk. If you would invest 794.00 in Vipshop Holdings Limited on February 4, 2024 and sell it today you would earn a total of 851.00 from holding Vipshop Holdings Limited or generate 107.18% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Vipshop Holdings Limited vs. Rakuten Inc ADR
Performance |
Timeline |
Vipshop Holdings |
Rakuten Inc ADR |
Vipshop Holdings and Rakuten Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vipshop Holdings and Rakuten
The main advantage of trading using opposite Vipshop Holdings and Rakuten positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vipshop Holdings position performs unexpectedly, Rakuten 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 Rakuten will offset losses from the drop in Rakuten's long position.Vipshop Holdings vs. Liquidity Services | Vipshop Holdings vs. Emerge Commerce | Vipshop Holdings vs. Solo Brands | Vipshop Holdings vs. Natural Health Trend |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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