Correlation Between LM Funding and Qudian

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

Diversification Opportunities for LM Funding and Qudian

-0.35

Correlation Coefficient

LM Funding  Qudian

Very good diversification

The 3 months correlation between LMFA and Qudian is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding LM Funding America and Qudian Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qudian Inc 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 Qudian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qudian Inc has no effect on the direction of LM Funding i.e., LM Funding and Qudian go up and down completely randomly.

Pair Corralation between LM Funding and Qudian

Given the investment horizon of 90 days LM Funding America is expected to under-perform the Qudian. In addition to that, LM Funding is 1.15 times more volatile than Qudian Inc. It trades about -0.1 of its total potential returns per unit of risk. Qudian Inc is currently generating about 0.15 per unit of volatility. If you would invest  298.00  in Qudian Inc on November 19, 2024 and sell it today you would earn a total of  30.00  from holding Qudian Inc or generate 10.07% return on investment over 90 days.

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

LM Funding America  vs.  Qudian Inc

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.

Qudian Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qudian Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Qudian exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LM Funding and Qudian

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

The idea behind LM Funding America and Qudian Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.