Correlation Between FinVolution and Northern

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

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

Diversification Opportunities for FinVolution and Northern

0.4

Correlation Coefficient

FinVolution  Northern

Very weak diversification

The 3 months correlation between FinVolution and Northern is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding FinVolution Group and Northern Quality Esg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Quality Esg 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 Northern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Quality Esg has no effect on the direction of FinVolution i.e., FinVolution and Northern go up and down completely randomly.

Pair Corralation between FinVolution and Northern

Given the investment horizon of 90 days FinVolution Group is expected to generate 2.48 times more return on investment than Northern. However, FinVolution is 2.48 times more volatile than Northern Quality Esg. It trades about 0.04 of its potential returns per unit of risk. Northern Quality Esg is currently generating about 0.09 per unit of risk. If you would invest  494.00  in FinVolution Group on October 5, 2024 and sell it today you would earn a total of  184.00  from holding FinVolution Group or generate 37.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

FinVolution Group  vs.  Northern Quality Esg

FinVolution Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FinVolution Group are ranked lower than 1 (%) 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.

Northern Quality Esg

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Quality Esg are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Northern is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FinVolution and Northern

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

The idea behind FinVolution Group and Northern Quality Esg 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.