Correlation Between Vipshop Holdings and JD

Can any of the company-specific risk be diversified away by investing in both Vipshop Holdings and JD 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 JD 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 JD Inc Adr, you can compare the effects of market volatilities on Vipshop Holdings and JD 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 JD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vipshop Holdings and JD.

Diversification Opportunities for Vipshop Holdings and JD

0.89

Correlation Coefficient

Vipshop Holdings  JD

Very poor diversification

The 3 months correlation between Vipshop and JD is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and JD Inc Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD 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 JD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Inc Adr has no effect on the direction of Vipshop Holdings i.e., Vipshop Holdings and JD go up and down completely randomly.

Pair Corralation between Vipshop Holdings and JD

Given the investment horizon of 90 days Vipshop Holdings is expected to generate 3.59 times less return on investment than JD. But when comparing it to its historical volatility, Vipshop Holdings Limited is 1.45 times less risky than JD. It trades about 0.06 of its potential returns per unit of risk. JD Inc Adr is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,700  in JD Inc Adr on August 30, 2024 and sell it today you would earn a total of  1,019  from holding JD Inc Adr or generate 37.74% return on investment over 90 days.

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

Vipshop Holdings Limited  vs.  JD Inc Adr

Vipshop Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vipshop Holdings Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Vipshop Holdings may actually be approaching a critical reversion point that can send shares even higher in December 2024.

JD Inc Adr

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JD Inc Adr are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, JD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vipshop Holdings and JD

The main advantage of trading using opposite Vipshop Holdings and JD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vipshop Holdings position performs unexpectedly, JD 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 JD will offset losses from the drop in JD's long position.

The idea behind Vipshop Holdings Limited and JD Inc Adr 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.