Correlation Between Qudian and Lexinfintech Holdings

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

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

Diversification Opportunities for Qudian and Lexinfintech Holdings

0.01

Correlation Coefficient

Qudian  Lexinfintech Holdings

Significant diversification

The 3 months correlation between Qudian and Lexinfintech is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Qudian Inc and Lexinfintech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexinfintech Holdings and Qudian 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 Qudian Inc are associated (or correlated) with Lexinfintech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexinfintech Holdings has no effect on the direction of Qudian i.e., Qudian and Lexinfintech Holdings go up and down completely randomly.

Pair Corralation between Qudian and Lexinfintech Holdings

Allowing for the 90-day total investment horizon Qudian Inc is expected to under-perform the Lexinfintech Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Qudian Inc is 1.68 times less risky than Lexinfintech Holdings. The stock trades about -0.03 of its potential returns per unit of risk. The Lexinfintech Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  589.00  in Lexinfintech Holdings on December 29, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Qudian Inc  vs.  Lexinfintech Holdings

Qudian Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qudian Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Qudian is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Lexinfintech Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lexinfintech Holdings are ranked lower than 17 (%) 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.

Pair Trading with Qudian and Lexinfintech Holdings

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

The idea behind Qudian Inc and Lexinfintech Holdings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.