Correlation Between Lexinfintech Holdings and Eason Technology

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

By analyzing existing cross correlation between Lexinfintech Holdings and Eason Technology Limited, you can compare the effects of market volatilities on Lexinfintech Holdings and Eason Technology 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 Lexinfintech Holdings with a short position of Eason Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lexinfintech Holdings and Eason Technology.

Diversification Opportunities for Lexinfintech Holdings and Eason Technology

0.55

Correlation Coefficient

Lexinfintech Holdings  Eason Technology

Very weak diversification

The 3 months correlation between Lexinfintech and Eason is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Lexinfintech Holdings and Eason Technology Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eason Technology and Lexinfintech Holdings 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 Lexinfintech Holdings are associated (or correlated) with Eason Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eason Technology has no effect on the direction of Lexinfintech Holdings i.e., Lexinfintech Holdings and Eason Technology go up and down completely randomly.

Pair Corralation between Lexinfintech Holdings and Eason Technology

Allowing for the 90-day total investment horizon Lexinfintech Holdings is expected to generate 3.24 times less return on investment than Eason Technology. But when comparing it to its historical volatility, Lexinfintech Holdings is 9.76 times less risky than Eason Technology. It trades about 0.2 of its potential returns per unit of risk. Eason Technology Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,900  in Eason Technology Limited on November 28, 2024 and sell it today you would lose (1,778) from holding Eason Technology Limited or give up 61.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	37.93%
Values	Daily Returns

Lexinfintech Holdings  vs.  Eason Technology Limited

Lexinfintech Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lexinfintech Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Lexinfintech Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Eason Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eason Technology Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Eason Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lexinfintech Holdings and Eason Technology

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

The idea behind Lexinfintech Holdings and Eason Technology Limited 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.