Correlation Between Lexinfintech Holdings and Capital One

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

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

Diversification Opportunities for Lexinfintech Holdings and Capital One

-0.35

Correlation Coefficient

Lexinfintech Holdings  Capital One

Very good diversification

The 3 months correlation between Lexinfintech and Capital is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lexinfintech Holdings and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial and Lexinfintech Holdings 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 Lexinfintech Holdings are associated (or correlated) with Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Lexinfintech Holdings i.e., Lexinfintech Holdings and Capital One go up and down completely randomly.

Pair Corralation between Lexinfintech Holdings and Capital One

Allowing for the 90-day total investment horizon Lexinfintech Holdings is expected to generate 6.28 times more return on investment than Capital One. However, Lexinfintech Holdings is 6.28 times more volatile than Capital One Financial. It trades about 0.28 of its potential returns per unit of risk. Capital One Financial is currently generating about -0.04 per unit of risk. If you would invest  166.00  in Lexinfintech Holdings on September 5, 2024 and sell it today you would earn a total of  379.00  from holding Lexinfintech Holdings or generate 228.31% return on investment over 90 days.

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

Lexinfintech Holdings  vs.  Capital One Financial

Lexinfintech Holdings

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lexinfintech Holdings are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Lexinfintech Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Capital One Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital One Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Capital One is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Lexinfintech Holdings and Capital One

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

The idea behind Lexinfintech Holdings and Capital One Financial 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.