Correlation Between X Financial and China Lending

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

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

Diversification Opportunities for X Financial and China Lending

-0.46

Correlation Coefficient

X Financial  China Lending

Very good diversification

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

Pair Corralation between X Financial and China Lending

If you would invest  11.00  in China Lending Corp on August 12, 2024 and sell it today you would earn a total of  0.00  from holding China Lending Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

X Financial Class  vs.  China Lending Corp

X Financial Class

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in X Financial Class are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, X Financial reported solid returns over the last few months and may actually be approaching a breakup point.

China Lending Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Lending Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, China Lending is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with X Financial and China Lending

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

The idea behind X Financial Class and China Lending Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.