Correlation Between FinVolution and Incitec Pivot

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

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

Diversification Opportunities for FinVolution and Incitec Pivot

-0.12

Correlation Coefficient

FinVolution  Incitec Pivot

Good diversification

The 3 months correlation between FinVolution and Incitec is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding FinVolution Group and Incitec Pivot Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incitec Pivot 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 Incitec Pivot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incitec Pivot has no effect on the direction of FinVolution i.e., FinVolution and Incitec Pivot go up and down completely randomly.

Pair Corralation between FinVolution and Incitec Pivot

Given the investment horizon of 90 days FinVolution is expected to generate 20.65 times less return on investment than Incitec Pivot. But when comparing it to its historical volatility, FinVolution Group is 2.21 times less risky than Incitec Pivot. It trades about 0.02 of its potential returns per unit of risk. Incitec Pivot Ltd is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  196.00  in Incitec Pivot Ltd on October 6, 2024 and sell it today you would earn a total of  25.00  from holding Incitec Pivot Ltd or generate 12.76% return on investment over 90 days.

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

FinVolution Group  vs.  Incitec Pivot Ltd

FinVolution Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FinVolution Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Incitec Pivot

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Incitec Pivot Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Incitec Pivot showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FinVolution and Incitec Pivot

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

The idea behind FinVolution Group and Incitec Pivot Ltd 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.