Correlation Between X Financial and Pandora A/S

Can any of the company-specific risk be diversified away by investing in both X Financial and Pandora A/S 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 Pandora A/S 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 Pandora AS, you can compare the effects of market volatilities on X Financial and Pandora A/S 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 Pandora A/S. Check out your portfolio center. Please also check ongoing floating volatility patterns of X Financial and Pandora A/S.

Diversification Opportunities for X Financial and Pandora A/S

0.86

Correlation Coefficient

X Financial  Pandora A/S

Very poor diversification

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

Pair Corralation between X Financial and Pandora A/S

Considering the 90-day investment horizon X Financial is expected to generate 1.29 times less return on investment than Pandora A/S. In addition to that, X Financial is 2.18 times more volatile than Pandora AS. It trades about 0.07 of its total potential returns per unit of risk. Pandora AS is currently generating about 0.2 per unit of volatility. If you would invest  14,130  in Pandora AS on October 4, 2024 and sell it today you would earn a total of  3,565  from holding Pandora AS or generate 25.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.77%
Values	Daily Returns

X Financial Class  vs.  Pandora AS

X Financial Class

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in X Financial Class are ranked lower than 5 (%) 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.

Pandora A/S

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pandora AS are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pandora A/S reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X Financial and Pandora A/S

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

The idea behind X Financial Class and Pandora AS 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.