Correlation Between FinVolution and Finch Therapeutics

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

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

Diversification Opportunities for FinVolution and Finch Therapeutics

-0.64

Correlation Coefficient

FinVolution  Finch Therapeutics

Excellent diversification

The 3 months correlation between FinVolution and Finch is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding FinVolution Group and Finch Therapeutics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finch Therapeutics 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 Finch Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finch Therapeutics has no effect on the direction of FinVolution i.e., FinVolution and Finch Therapeutics go up and down completely randomly.

Pair Corralation between FinVolution and Finch Therapeutics

If you would invest  628.00  in FinVolution Group on October 22, 2024 and sell it today you would earn a total of  74.00  from holding FinVolution Group or generate 11.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.64%
Values	Daily Returns

FinVolution Group  vs.  Finch Therapeutics Group

FinVolution Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FinVolution Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, FinVolution showed solid returns over the last few months and may actually be approaching a breakup point.

Finch Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Finch Therapeutics Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Finch Therapeutics is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with FinVolution and Finch Therapeutics

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

The idea behind FinVolution Group and Finch Therapeutics Group 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..