Correlation Between Amazon and Baozun
Can any of the company-specific risk be diversified away by investing in both Amazon and Baozun 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 Amazon and Baozun into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Baozun Inc, you can compare the effects of market volatilities on Amazon and Baozun 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 Amazon with a short position of Baozun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Baozun.
Diversification Opportunities for Amazon and Baozun
Average diversification
The 3 months correlation between Amazon and Baozun is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Baozun Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baozun Inc and Amazon 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 Amazon Inc are associated (or correlated) with Baozun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baozun Inc has no effect on the direction of Amazon i.e., Amazon and Baozun go up and down completely randomly.
Pair Corralation between Amazon and Baozun
Given the investment horizon of 90 days Amazon is expected to generate 1.94 times less return on investment than Baozun. But when comparing it to its historical volatility, Amazon Inc is 3.63 times less risky than Baozun. It trades about 0.17 of its potential returns per unit of risk. Baozun Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 225.00 in Baozun Inc on November 2, 2024 and sell it today you would earn a total of 110.00 from holding Baozun Inc or generate 48.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Baozun Inc
Performance |
| Timeline |
| Amazon Inc |
| Baozun Inc |
Amazon and Baozun Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Baozun
The main advantage of trading using opposite Amazon and Baozun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Baozun 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 Baozun will offset losses from the drop in Baozun's long position.The idea behind Amazon Inc and Baozun Inc 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.| Baozun vs. PDD Holdings | Baozun vs. JD Inc Adr | Baozun vs. Global E Online | Baozun vs. Vipshop Holdings Limited |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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