Correlation Between Small Cap and X Financial
Can any of the company-specific risk be diversified away by investing in both Small Cap and X Financial 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 Small Cap and X Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Core and X Financial Class, you can compare the effects of market volatilities on Small Cap and X Financial 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 Small Cap with a short position of X Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and X Financial.
Diversification Opportunities for Small Cap and X Financial
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Small and XYF is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and X Financial Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Financial Class and Small Cap 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 Small Cap Core are associated (or correlated) with X Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Financial Class has no effect on the direction of Small Cap i.e., Small Cap and X Financial go up and down completely randomly.
Pair Corralation between Small Cap and X Financial
Assuming the 90 days horizon Small Cap is expected to generate 2.48 times less return on investment than X Financial. But when comparing it to its historical volatility, Small Cap Core is 2.72 times less risky than X Financial. It trades about 0.07 of its potential returns per unit of risk. X Financial Class is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 339.00 in X Financial Class on August 27, 2024 and sell it today you would earn a total of 291.00 from holding X Financial Class or generate 85.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. X Financial Class
Performance |
| Timeline |
| Small Cap Core |
| X Financial Class |
Small Cap and X Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and X Financial
The main advantage of trading using opposite Small Cap and X Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, X Financial 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 X Financial will offset losses from the drop in X Financial's long position.| Small Cap vs. Pro Blend Moderate Term | Small Cap vs. Hartford Moderate Allocation | Small Cap vs. Qs Moderate Growth | Small Cap vs. Dimensional Retirement Income |
| X Financial vs. LM Funding America | X Financial vs. Nisun International Enterprise | X Financial vs. Qudian Inc | X Financial vs. FinVolution Group |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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