Correlation Between X Financial and Regional Management

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

Diversification Opportunities for X Financial and Regional Management

-0.53

Correlation Coefficient

X Financial  Regional Management

Excellent diversification

The 3 months correlation between XYF and Regional is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Regional Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Management 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 Regional Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Management Corp has no effect on the direction of X Financial i.e., X Financial and Regional Management go up and down completely randomly.

Pair Corralation between X Financial and Regional Management

Considering the 90-day investment horizon X Financial Class is expected to generate 0.86 times more return on investment than Regional Management. However, X Financial Class is 1.16 times less risky than Regional Management. It trades about 0.19 of its potential returns per unit of risk. Regional Management Corp is currently generating about 0.12 per unit of risk. If you would invest  656.00  in X Financial Class on August 30, 2024 and sell it today you would earn a total of  70.00  from holding X Financial Class or generate 10.67% return on investment over 90 days.

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

X Financial Class  vs.  Regional Management Corp

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.

Regional Management Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regional Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Regional Management is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with X Financial and Regional Management

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

The idea behind X Financial Class and Regional Management 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.