Correlation Between FinVolution and Premier Polyfilm

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

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

Diversification Opportunities for FinVolution and Premier Polyfilm

0.16

Correlation Coefficient

FinVolution  Premier Polyfilm

Average diversification

The 3 months correlation between FinVolution and Premier is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding FinVolution Group and Premier Polyfilm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Polyfilm 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 Premier Polyfilm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Polyfilm has no effect on the direction of FinVolution i.e., FinVolution and Premier Polyfilm go up and down completely randomly.

Pair Corralation between FinVolution and Premier Polyfilm

Given the investment horizon of 90 days FinVolution is expected to generate 4.46 times less return on investment than Premier Polyfilm. But when comparing it to its historical volatility, FinVolution Group is 1.87 times less risky than Premier Polyfilm. It trades about 0.04 of its potential returns per unit of risk. Premier Polyfilm Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,934  in Premier Polyfilm Limited on October 4, 2024 and sell it today you would earn a total of  6,178  from holding Premier Polyfilm Limited or generate 319.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.58%
Values	Daily Returns

FinVolution Group  vs.  Premier Polyfilm Limited

FinVolution Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FinVolution Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, FinVolution is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Premier Polyfilm

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Polyfilm Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Premier Polyfilm reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FinVolution and Premier Polyfilm

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

The idea behind FinVolution Group and Premier Polyfilm Limited 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.