Correlation Between Capital One and X Financial

Can any of the company-specific risk be diversified away by investing in both Capital One and X Financial 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 Capital One and X Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capital One Financial and X Financial Class, you can compare the effects of market volatilities on Capital One and X Financial 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 Capital One with a short position of X Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and X Financial.

Diversification Opportunities for Capital One and X Financial

0.46

Correlation Coefficient

Capital One  X Financial

Very weak diversification

The 3 months correlation between Capital and XYF is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and X Financial Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Financial Class and Capital One 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 Capital One Financial are associated (or correlated) with X Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Financial Class has no effect on the direction of Capital One i.e., Capital One and X Financial go up and down completely randomly.

Pair Corralation between Capital One and X Financial

Considering the 90-day investment horizon Capital One Financial is expected to generate 0.44 times more return on investment than X Financial. However, Capital One Financial is 2.3 times less risky than X Financial. It trades about 0.13 of its potential returns per unit of risk. X Financial Class is currently generating about 0.04 per unit of risk. If you would invest  18,512  in Capital One Financial on May 6, 2025 and sell it today you would earn a total of  2,567  from holding Capital One Financial or generate 13.87% return on investment over 90 days.

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

Capital One Financial  vs.  X Financial Class

Capital One Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Capital One reported solid returns over the last few months and may actually be approaching a breakup point.

X Financial Class

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in X Financial Class are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, X Financial may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Capital One and X Financial

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

The idea behind Capital One Financial and X Financial Class 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.