Correlation Between X Financial and IShares Continental

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

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

Diversification Opportunities for X Financial and IShares Continental

0.07

Correlation Coefficient

X Financial  IShares Continental

Significant diversification

The 3 months correlation between XYF and IShares is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and iShares Continental European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Continental and X 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 X Financial Class are associated (or correlated) with IShares Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Continental has no effect on the direction of X Financial i.e., X Financial and IShares Continental go up and down completely randomly.

Pair Corralation between X Financial and IShares Continental

Considering the 90-day investment horizon X Financial Class is expected to generate 5.52 times more return on investment than IShares Continental. However, X Financial is 5.52 times more volatile than iShares Continental European. It trades about 0.16 of its potential returns per unit of risk. iShares Continental European is currently generating about -0.03 per unit of risk. If you would invest  684.00  in X Financial Class on October 6, 2024 and sell it today you would earn a total of  164.00  from holding X Financial Class or generate 23.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

X Financial Class  vs.  iShares Continental European

X Financial Class

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in X Financial Class are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, X Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

iShares Continental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Continental European has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, IShares Continental is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with X Financial and IShares Continental

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

The idea behind X Financial Class and iShares Continental European 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.