Correlation Between Alibaba Group and Vipshop Holdings
Can any of the company-specific risk be diversified away by investing in both Alibaba Group and Vipshop Holdings 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 Alibaba Group and Vipshop Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alibaba Group Holding and Vipshop Holdings Limited, you can compare the effects of market volatilities on Alibaba Group and Vipshop Holdings 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 Alibaba Group with a short position of Vipshop Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Vipshop Holdings.
Diversification Opportunities for Alibaba Group and Vipshop Holdings
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Alibaba and Vipshop is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Vipshop Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vipshop Holdings and Alibaba Group 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 Alibaba Group Holding are associated (or correlated) with Vipshop Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vipshop Holdings has no effect on the direction of Alibaba Group i.e., Alibaba Group and Vipshop Holdings go up and down completely randomly.
Pair Corralation between Alibaba Group and Vipshop Holdings
Assuming the 90 days trading horizon Alibaba Group Holding is expected to under-perform the Vipshop Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Alibaba Group Holding is 1.05 times less risky than Vipshop Holdings. The stock trades about -0.23 of its potential returns per unit of risk. The Vipshop Holdings Limited is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 3,966 in Vipshop Holdings Limited on August 24, 2024 and sell it today you would lose (140.00) from holding Vipshop Holdings Limited or give up 3.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alibaba Group Holding vs. Vipshop Holdings Limited
Performance |
| Timeline |
| Alibaba Group Holding |
| Vipshop Holdings |
Alibaba Group and Vipshop Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alibaba Group and Vipshop Holdings
The main advantage of trading using opposite Alibaba Group and Vipshop Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group position performs unexpectedly, Vipshop Holdings 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 Vipshop Holdings will offset losses from the drop in Vipshop Holdings' long position.| Alibaba Group vs. Amazon Inc | Alibaba Group vs. Enjoei SA | Alibaba Group vs. BTG Pactual Logstica | Alibaba Group vs. Companhia Paranaense de |
| Vipshop Holdings vs. Alibaba Group Holding | Vipshop Holdings vs. Amazon Inc | Vipshop Holdings vs. Enjoei SA | Vipshop Holdings vs. BTG Pactual Logstica |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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