Correlation Between Lexinfintech Holdings and Gladstone Investment

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

By analyzing existing cross correlation between Lexinfintech Holdings and Gladstone Investment, you can compare the effects of market volatilities on Lexinfintech Holdings and Gladstone Investment 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 Gladstone Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lexinfintech Holdings and Gladstone Investment.

Diversification Opportunities for Lexinfintech Holdings and Gladstone Investment

-0.38

Correlation Coefficient

Lexinfintech Holdings  Gladstone Investment

Very good diversification

The 3 months correlation between Lexinfintech and Gladstone is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Lexinfintech Holdings and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment 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 Gladstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Investment has no effect on the direction of Lexinfintech Holdings i.e., Lexinfintech Holdings and Gladstone Investment go up and down completely randomly.

Pair Corralation between Lexinfintech Holdings and Gladstone Investment

Allowing for the 90-day total investment horizon Lexinfintech Holdings is expected to generate 15.92 times more return on investment than Gladstone Investment. However, Lexinfintech Holdings is 15.92 times more volatile than Gladstone Investment. It trades about 0.43 of its potential returns per unit of risk. Gladstone Investment is currently generating about 0.11 per unit of risk. If you would invest  322.00  in Lexinfintech Holdings on September 20, 2024 and sell it today you would earn a total of  250.50  from holding Lexinfintech Holdings or generate 77.8% return on investment over 90 days.

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

Lexinfintech Holdings  vs.  Gladstone Investment

Lexinfintech Holdings

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lexinfintech Holdings are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lexinfintech Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Gladstone Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gladstone Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gladstone Investment is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lexinfintech Holdings and Gladstone Investment

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

The idea behind Lexinfintech Holdings and Gladstone Investment 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.