Correlation Between X Financial and Lexinfintech Holdings

Can any of the company-specific risk be diversified away by investing in both X Financial 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 X Financial and Lexinfintech Holdings 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 Lexinfintech Holdings, you can compare the effects of market volatilities on X Financial 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 X Financial with a short position of Lexinfintech Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of X Financial and Lexinfintech Holdings.

Diversification Opportunities for X Financial and Lexinfintech Holdings

0.91

Correlation Coefficient

X Financial  Lexinfintech Holdings

Almost no diversification

The 3 months correlation between XYF and Lexinfintech is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Lexinfintech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexinfintech Holdings 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 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 X Financial i.e., X Financial and Lexinfintech Holdings go up and down completely randomly.

Pair Corralation between X Financial and Lexinfintech Holdings

Considering the 90-day investment horizon X Financial is expected to generate 2.5 times less return on investment than Lexinfintech Holdings. But when comparing it to its historical volatility, X Financial Class is 1.66 times less risky than Lexinfintech Holdings. It trades about 0.18 of its potential returns per unit of risk. Lexinfintech Holdings is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  167.00  in Lexinfintech Holdings on August 31, 2024 and sell it today you would earn a total of  323.00  from holding Lexinfintech Holdings or generate 193.41% return on investment over 90 days.

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

X Financial Class  vs.  Lexinfintech Holdings

X Financial Class

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in X Financial Class are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, X Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Lexinfintech Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lexinfintech Holdings are ranked lower than 20 (%) 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 X Financial and Lexinfintech Holdings

The main advantage of trading using opposite X Financial and Lexinfintech Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X Financial 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 X Financial Class 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.