Correlation Between Sally Beauty and Vipshop Holdings

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

Diversification Opportunities for Sally Beauty and Vipshop Holdings

-0.6
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Sally and Vipshop is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sally Beauty Holdings and Vipshop Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vipshop Holdings and Sally Beauty 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 Sally Beauty Holdings 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 Sally Beauty i.e., Sally Beauty and Vipshop Holdings go up and down completely randomly.

Pair Corralation between Sally Beauty and Vipshop Holdings

Considering the 90-day investment horizon Sally Beauty Holdings is expected to generate 0.78 times more return on investment than Vipshop Holdings. However, Sally Beauty Holdings is 1.28 times less risky than Vipshop Holdings. It trades about 0.01 of its potential returns per unit of risk. Vipshop Holdings is currently generating about -0.02 per unit of risk. If you would invest  1,221  in Sally Beauty Holdings on March 31, 2022 and sell it today you would lose (44.00)  from holding Sally Beauty Holdings or give up 3.6% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Sally Beauty Holdings  vs.  Vipshop Holdings Ltd

 Performance (%) 
      Timeline 
Sally Beauty Holdings 
Sally Performance
0 of 100
Over the last 90 days Sally Beauty Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Structure and Payout Changes

Last Split Factor
3:2
Last Split Date
2004-02-23

Sally Price Channel

Vipshop Holdings 
Vipshop Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Vipshop Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Vipshop Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Structure and Payout Changes

Last Split Factor
10:1
Last Split Date
2014-11-04

Vipshop Price Channel

Sally Beauty and Vipshop Holdings Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Sally Beauty and Vipshop Holdings

The main advantage of trading using opposite Sally Beauty and Vipshop Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sally Beauty 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.
The idea behind Sally Beauty Holdings and Vipshop Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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