Correlation Between SLM Corp and Lexinfintech Holdings

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

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

Diversification Opportunities for SLM Corp and Lexinfintech Holdings

-0.71

Correlation Coefficient

SLM Corp  Lexinfintech Holdings

Pay attention - limited upside

The 3 months correlation between SLM and Lexinfintech is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding SLM Corp Pb and Lexinfintech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexinfintech Holdings and SLM Corp 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 SLM Corp Pb are associated (or correlated) with Lexinfintech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexinfintech Holdings has no effect on the direction of SLM Corp i.e., SLM Corp and Lexinfintech Holdings go up and down completely randomly.

Pair Corralation between SLM Corp and Lexinfintech Holdings

Assuming the 90 days horizon SLM Corp is expected to generate 285.44 times less return on investment than Lexinfintech Holdings. But when comparing it to its historical volatility, SLM Corp Pb is 14.14 times less risky than Lexinfintech Holdings. It trades about 0.01 of its potential returns per unit of risk. Lexinfintech Holdings is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  166.00  in Lexinfintech Holdings on August 30, 2024 and sell it today you would earn a total of  261.00  from holding Lexinfintech Holdings or generate 157.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

SLM Corp Pb  vs.  Lexinfintech Holdings

SLM Corp Pb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SLM Corp Pb has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, SLM Corp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Lexinfintech Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lexinfintech Holdings are ranked lower than 18 (%) 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.

Pair Trading with SLM Corp and Lexinfintech Holdings

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

The idea behind SLM Corp Pb and Lexinfintech 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.