Correlation Between FinVolution and Tanaka Growth

Can any of the company-specific risk be diversified away by investing in both FinVolution and Tanaka 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 Tanaka 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 Tanaka Growth Fund, you can compare the effects of market volatilities on FinVolution and Tanaka 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 Tanaka Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of FinVolution and Tanaka Growth.

Diversification Opportunities for FinVolution and Tanaka Growth

0.02

Correlation Coefficient

FinVolution  Tanaka Growth

Significant diversification

The 3 months correlation between FinVolution and Tanaka is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding FinVolution Group and Tanaka Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tanaka Growth 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 Tanaka Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tanaka Growth has no effect on the direction of FinVolution i.e., FinVolution and Tanaka Growth go up and down completely randomly.

Pair Corralation between FinVolution and Tanaka Growth

Given the investment horizon of 90 days FinVolution is expected to generate 1.23 times less return on investment than Tanaka Growth. In addition to that, FinVolution is 1.43 times more volatile than Tanaka Growth Fund. It trades about 0.04 of its total potential returns per unit of risk. Tanaka Growth Fund is currently generating about 0.07 per unit of volatility. If you would invest  2,931  in Tanaka Growth Fund on October 4, 2024 and sell it today you would earn a total of  1,652  from holding Tanaka Growth Fund or generate 56.36% return on investment over 90 days.

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

FinVolution Group  vs.  Tanaka Growth Fund

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.

Tanaka Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tanaka Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Tanaka Growth 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 Tanaka Growth

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

The idea behind FinVolution Group and Tanaka Growth Fund 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.