Correlation Between FinVolution and SK Growth

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

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

Diversification Opportunities for FinVolution and SK Growth

-0.27

Correlation Coefficient

FinVolution  SK Growth

Very good diversification

The 3 months correlation between FinVolution and SKGRU is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding FinVolution Group and SK Growth Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Growth Opportunities 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 SK Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Growth Opportunities has no effect on the direction of FinVolution i.e., FinVolution and SK Growth go up and down completely randomly.

Pair Corralation between FinVolution and SK Growth

Given the investment horizon of 90 days FinVolution is expected to generate 435.4 times less return on investment than SK Growth. But when comparing it to its historical volatility, FinVolution Group is 98.49 times less risky than SK Growth. It trades about 0.04 of its potential returns per unit of risk. SK Growth Opportunities is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,034  in SK Growth Opportunities on October 6, 2024 and sell it today you would earn a total of  133.00  from holding SK Growth Opportunities or generate 12.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	25.47%
Values	Daily Returns

FinVolution Group  vs.  SK Growth Opportunities

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.

SK Growth Opportunities

Risk-Adjusted Performance

0 of 100

Excellent

Over the last 90 days SK Growth Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, SK Growth unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FinVolution and SK Growth

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

The idea behind FinVolution Group and SK Growth Opportunities 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.