Correlation Between Velocity Financial and CNFinance Holdings

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

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

Diversification Opportunities for Velocity Financial and CNFinance Holdings

-0.45

Correlation Coefficient

Velocity Financial  CNFinance Holdings

Very good diversification

The 3 months correlation between Velocity and CNFinance is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Velocity Financial Llc and CNFinance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNFinance Holdings and Velocity 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 Velocity Financial Llc are associated (or correlated) with CNFinance Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNFinance Holdings has no effect on the direction of Velocity Financial i.e., Velocity Financial and CNFinance Holdings go up and down completely randomly.

Pair Corralation between Velocity Financial and CNFinance Holdings

Considering the 90-day investment horizon Velocity Financial Llc is expected to generate 0.18 times more return on investment than CNFinance Holdings. However, Velocity Financial Llc is 5.66 times less risky than CNFinance Holdings. It trades about -0.04 of its potential returns per unit of risk. CNFinance Holdings is currently generating about -0.02 per unit of risk. If you would invest  1,922  in Velocity Financial Llc on October 25, 2024 and sell it today you would lose (59.00) from holding Velocity Financial Llc or give up 3.07% of portfolio value over 90 days.

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

Velocity Financial Llc  vs.  CNFinance Holdings

Velocity Financial Llc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Velocity Financial Llc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Velocity Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

CNFinance Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNFinance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Velocity Financial and CNFinance Holdings

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

The idea behind Velocity Financial Llc and CNFinance 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.