Correlation Between Oportun Financial and X Financial

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

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

Diversification Opportunities for Oportun Financial and X Financial

0.86

Correlation Coefficient

Oportun Financial  X Financial

Very poor diversification

The 3 months correlation between Oportun and XYF is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Oportun Financial Corp and X Financial Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Financial Class and Oportun Financial 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 Oportun Financial Corp are associated (or correlated) with X Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Financial Class has no effect on the direction of Oportun Financial i.e., Oportun Financial and X Financial go up and down completely randomly.

Pair Corralation between Oportun Financial and X Financial

Given the investment horizon of 90 days Oportun Financial Corp is expected to generate 1.32 times more return on investment than X Financial. However, Oportun Financial is 1.32 times more volatile than X Financial Class. It trades about 0.3 of its potential returns per unit of risk. X Financial Class is currently generating about 0.13 per unit of risk. If you would invest  389.00  in Oportun Financial Corp on December 2, 2024 and sell it today you would earn a total of  317.00  from holding Oportun Financial Corp or generate 81.49% return on investment over 90 days.

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

Oportun Financial Corp  vs.  X Financial Class

Oportun Financial Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oportun Financial Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Oportun Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

X Financial Class

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in X Financial Class are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, X Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oportun Financial and X Financial

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

The idea behind Oportun Financial Corp and X Financial Class 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.