Correlation Between LendingClub Corp and Freedom Holding

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

By analyzing existing cross correlation between LendingClub Corp and Freedom Holding Corp, you can compare the effects of market volatilities on LendingClub Corp and Freedom Holding 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 LendingClub Corp with a short position of Freedom Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of LendingClub Corp and Freedom Holding.

Diversification Opportunities for LendingClub Corp and Freedom Holding

-0.64

Correlation Coefficient

LendingClub Corp  Freedom Holding

Excellent diversification

The 3 months correlation between LendingClub and Freedom is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding LendingClub Corp and Freedom Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Holding Corp and LendingClub Corp 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 LendingClub Corp are associated (or correlated) with Freedom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Holding Corp has no effect on the direction of LendingClub Corp i.e., LendingClub Corp and Freedom Holding go up and down completely randomly.

Pair Corralation between LendingClub Corp and Freedom Holding

Allowing for the 90-day total investment horizon LendingClub Corp is expected to under-perform the Freedom Holding. In addition to that, LendingClub Corp is 1.51 times more volatile than Freedom Holding Corp. It trades about -0.28 of its total potential returns per unit of risk. Freedom Holding Corp is currently generating about 0.14 per unit of volatility. If you would invest  13,483  in Freedom Holding Corp on November 28, 2024 and sell it today you would earn a total of  1,058  from holding Freedom Holding Corp or generate 7.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

LendingClub Corp  vs.  Freedom Holding Corp

LendingClub Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days LendingClub Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Freedom Holding Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Holding Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Freedom Holding exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LendingClub Corp and Freedom Holding

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

The idea behind LendingClub Corp and Freedom Holding Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.