Correlation Between FinVolution and Essentra Plc

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

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

Diversification Opportunities for FinVolution and Essentra Plc

-0.37

Correlation Coefficient

FinVolution  Essentra Plc

Very good diversification

The 3 months correlation between FinVolution and Essentra is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding FinVolution Group and Essentra plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essentra plc 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 Essentra Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essentra plc has no effect on the direction of FinVolution i.e., FinVolution and Essentra Plc go up and down completely randomly.

Pair Corralation between FinVolution and Essentra Plc

Given the investment horizon of 90 days FinVolution Group is expected to generate 1.5 times more return on investment than Essentra Plc. However, FinVolution is 1.5 times more volatile than Essentra plc. It trades about 0.18 of its potential returns per unit of risk. Essentra plc is currently generating about -0.13 per unit of risk. If you would invest  702.00  in FinVolution Group on December 26, 2024 and sell it today you would earn a total of  269.00  from holding FinVolution Group or generate 38.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

FinVolution Group  vs.  Essentra plc

FinVolution Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FinVolution Group are ranked lower than 14 (%) 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.

Essentra plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Essentra plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with FinVolution and Essentra Plc

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

The idea behind FinVolution Group and Essentra plc 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.