Correlation Between CNFinance Holdings and Velocity Financial

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

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

Diversification Opportunities for CNFinance Holdings and Velocity Financial

-0.31

Correlation Coefficient

CNFinance Holdings  Velocity Financial

Very good diversification

The 3 months correlation between CNFinance and Velocity is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding CNFinance Holdings and Velocity Financial Llc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Velocity Financial Llc and CNFinance 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 CNFinance Holdings are associated (or correlated) with Velocity Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Velocity Financial Llc has no effect on the direction of CNFinance Holdings i.e., CNFinance Holdings and Velocity Financial go up and down completely randomly.

Pair Corralation between CNFinance Holdings and Velocity Financial

Considering the 90-day investment horizon CNFinance Holdings is expected to under-perform the Velocity Financial. In addition to that, CNFinance Holdings is 9.32 times more volatile than Velocity Financial Llc. It trades about -0.24 of its total potential returns per unit of risk. Velocity Financial Llc is currently generating about 0.18 per unit of volatility. If you would invest  1,953  in Velocity Financial Llc on September 4, 2024 and sell it today you would earn a total of  109.00  from holding Velocity Financial Llc or generate 5.58% return on investment over 90 days.

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

CNFinance Holdings  vs.  Velocity Financial Llc

CNFinance Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CNFinance Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, CNFinance Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Velocity Financial Llc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Velocity Financial Llc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady technical and fundamental indicators, Velocity Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CNFinance Holdings and Velocity Financial

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

The idea behind CNFinance Holdings and Velocity Financial Llc 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 Global Correlations module to find global opportunities by holding instruments from different markets.