Correlation Between Etsy and Baozun Inc

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Can any of the company-specific risk be diversified away by investing in both Etsy and Baozun Inc 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 Etsy and Baozun Inc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Etsy Inc and Baozun Inc ADR, you can compare the effects of market volatilities on Etsy and Baozun Inc 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 Etsy with a short position of Baozun Inc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Etsy and Baozun Inc.

Diversification Opportunities for Etsy and Baozun Inc

-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between Etsy and Baozun is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Etsy Inc and Baozun Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baozun Inc ADR and Etsy 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 Etsy Inc are associated (or correlated) with Baozun Inc. 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 ADR has no effect on the direction of Etsy i.e., Etsy and Baozun Inc go up and down completely randomly.

Pair Corralation between Etsy and Baozun Inc

Given the investment horizon of 90 days Etsy Inc is expected to generate 1.15 times more return on investment than Baozun Inc. However, Etsy is 1.15 times more volatile than Baozun Inc ADR. It trades about 0.29 of its potential returns per unit of risk. Baozun Inc ADR is currently generating about -0.12 per unit of risk. If you would invest  7,181  in Etsy Inc on May 20, 2022 and sell it today you would earn a total of  4,264  from holding Etsy Inc or generate 59.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Etsy Inc  vs.  Baozun Inc ADR

 Performance (%) 
       Timeline  
Etsy Inc 
Etsy Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Etsy Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Etsy showed solid returns over the last few months and may actually be approaching a breakup point.

Etsy Price Channel

Baozun Inc ADR 
Baozun Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Baozun Inc ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Baozun Inc may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Baozun Price Channel

Etsy and Baozun Inc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Etsy and Baozun Inc

The main advantage of trading using opposite Etsy and Baozun Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etsy position performs unexpectedly, Baozun Inc 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 Inc will offset losses from the drop in Baozun Inc's long position.
The idea behind Etsy Inc and Baozun 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.
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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