Correlation Between LM Funding and FinVolution

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

By analyzing existing cross correlation between LM Funding America and FinVolution Group, you can compare the effects of market volatilities on LM Funding and FinVolution 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 LM Funding with a short position of FinVolution. Check out your portfolio center. Please also check ongoing floating volatility patterns of LM Funding and FinVolution.

Diversification Opportunities for LM Funding and FinVolution

-0.73

Correlation Coefficient

LM Funding  FinVolution

Pay attention - limited upside

The 3 months correlation between LMFA and FinVolution is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding LM Funding America and FinVolution Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FinVolution Group and LM Funding 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 LM Funding America are associated (or correlated) with FinVolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FinVolution Group has no effect on the direction of LM Funding i.e., LM Funding and FinVolution go up and down completely randomly.

Pair Corralation between LM Funding and FinVolution

Given the investment horizon of 90 days LM Funding America is expected to under-perform the FinVolution. In addition to that, LM Funding is 2.2 times more volatile than FinVolution Group. It trades about -0.12 of its total potential returns per unit of risk. FinVolution Group is currently generating about 0.24 per unit of volatility. If you would invest  623.00  in FinVolution Group on November 19, 2024 and sell it today you would earn a total of  214.00  from holding FinVolution Group or generate 34.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

LM Funding America  vs.  FinVolution Group

LM Funding America

Risk-Adjusted Performance

Very Weak

Over the last 90 days LM Funding America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

FinVolution Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FinVolution Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, FinVolution showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LM Funding and FinVolution

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

The idea behind LM Funding America and FinVolution Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.