Correlation Between FinVolution and KEISEI EL

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

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

Diversification Opportunities for FinVolution and KEISEI EL

0.72

Correlation Coefficient

FinVolution  KEISEI EL

Poor diversification

The 3 months correlation between FinVolution and KEISEI is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding FinVolution Group and KEISEI EL RAILWAY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEISEI EL RAILWAY 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 KEISEI EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEISEI EL RAILWAY has no effect on the direction of FinVolution i.e., FinVolution and KEISEI EL go up and down completely randomly.

Pair Corralation between FinVolution and KEISEI EL

Given the investment horizon of 90 days FinVolution Group is expected to generate 0.6 times more return on investment than KEISEI EL. However, FinVolution Group is 1.67 times less risky than KEISEI EL. It trades about 0.02 of its potential returns per unit of risk. KEISEI EL RAILWAY is currently generating about -0.02 per unit of risk. If you would invest  688.00  in FinVolution Group on October 6, 2024 and sell it today you would earn a total of  3.00  from holding FinVolution Group or generate 0.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.0%
Values	Daily Returns

FinVolution Group  vs.  KEISEI EL RAILWAY

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.

KEISEI EL RAILWAY

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KEISEI EL RAILWAY are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, KEISEI EL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FinVolution and KEISEI EL

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

The idea behind FinVolution Group and KEISEI EL RAILWAY 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.