Correlation Between FinVolution and Xtrackers

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

By analyzing existing cross correlation between FinVolution Group and Xtrackers SP, you can compare the effects of market volatilities on FinVolution and Xtrackers 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 FinVolution with a short position of Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of FinVolution and Xtrackers.

Diversification Opportunities for FinVolution and Xtrackers

0.66

Correlation Coefficient

FinVolution  Xtrackers

Poor diversification

The 3 months correlation between FinVolution and Xtrackers is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding FinVolution Group and Xtrackers SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP and FinVolution 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 FinVolution Group are associated (or correlated) with Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP has no effect on the direction of FinVolution i.e., FinVolution and Xtrackers go up and down completely randomly.

Pair Corralation between FinVolution and Xtrackers

Given the investment horizon of 90 days FinVolution is expected to generate 1.82 times less return on investment than Xtrackers. In addition to that, FinVolution is 1.33 times more volatile than Xtrackers SP. It trades about 0.04 of its total potential returns per unit of risk. Xtrackers SP is currently generating about 0.1 per unit of volatility. If you would invest  10,956  in Xtrackers SP on October 4, 2024 and sell it today you would earn a total of  11,389  from holding Xtrackers SP or generate 103.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.8%
Values	Daily Returns

FinVolution Group  vs.  Xtrackers SP

FinVolution Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FinVolution Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, FinVolution is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Xtrackers SP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers SP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Xtrackers may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FinVolution and Xtrackers

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

The idea behind FinVolution Group and Xtrackers SP 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.