Correlation Between Lexinfintech Holdings and Freedom Holding

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

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

Diversification Opportunities for Lexinfintech Holdings and Freedom Holding

0.24

Correlation Coefficient

Lexinfintech Holdings  Freedom Holding

Modest diversification

The 3 months correlation between Lexinfintech and Freedom is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lexinfintech Holdings 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 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 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 Lexinfintech Holdings i.e., Lexinfintech Holdings and Freedom Holding go up and down completely randomly.

Pair Corralation between Lexinfintech Holdings and Freedom Holding

Allowing for the 90-day total investment horizon Lexinfintech Holdings is expected to generate 2.09 times more return on investment than Freedom Holding. However, Lexinfintech Holdings is 2.09 times more volatile than Freedom Holding Corp. It trades about 0.22 of its potential returns per unit of risk. Freedom Holding Corp is currently generating about 0.02 per unit of risk. If you would invest  589.00  in Lexinfintech Holdings on December 30, 2024 and sell it today you would earn a total of  522.00  from holding Lexinfintech Holdings or generate 88.62% return on investment over 90 days.

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

Lexinfintech Holdings  vs.  Freedom Holding Corp

Lexinfintech Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lexinfintech Holdings are ranked lower than 16 (%) 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.

Freedom Holding Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Holding Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Freedom Holding is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lexinfintech Holdings and Freedom Holding

The main advantage of trading using opposite Lexinfintech Holdings and Freedom Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lexinfintech Holdings 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 Lexinfintech Holdings 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.