Correlation Between X Financial and Innovator Premium

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

Diversification Opportunities for X Financial and Innovator Premium

0.41

Correlation Coefficient

X Financial  Innovator Premium

Very weak diversification

The 3 months correlation between XYF and Innovator is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Innovator Premium Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Premium Income 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 Innovator Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Premium Income has no effect on the direction of X Financial i.e., X Financial and Innovator Premium go up and down completely randomly.

Pair Corralation between X Financial and Innovator Premium

Considering the 90-day investment horizon X Financial Class is expected to generate 22.98 times more return on investment than Innovator Premium. However, X Financial is 22.98 times more volatile than Innovator Premium Income. It trades about 0.06 of its potential returns per unit of risk. Innovator Premium Income is currently generating about 0.13 per unit of risk. If you would invest  349.00  in X Financial Class on October 4, 2024 and sell it today you would earn a total of  484.00  from holding X Financial Class or generate 138.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.11%
Values	Daily Returns

X Financial Class  vs.  Innovator Premium Income

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.

Innovator Premium Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovator Premium Income has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Innovator Premium is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with X Financial and Innovator Premium

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

The idea behind X Financial Class and Innovator Premium Income 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.