Correlation Between X Financial and Bayer AG

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

Diversification Opportunities for X Financial and Bayer AG

-0.38

Correlation Coefficient

X Financial  Bayer AG

Very good diversification

The 3 months correlation between XYF and Bayer is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Bayer AG NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG NA 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 Bayer AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayer AG NA has no effect on the direction of X Financial i.e., X Financial and Bayer AG go up and down completely randomly.

Pair Corralation between X Financial and Bayer AG

Considering the 90-day investment horizon X Financial Class is expected to generate 1.96 times more return on investment than Bayer AG. However, X Financial is 1.96 times more volatile than Bayer AG NA. It trades about 0.07 of its potential returns per unit of risk. Bayer AG NA is currently generating about -0.1 per unit of risk. If you would invest  326.00  in X Financial Class on October 5, 2024 and sell it today you would earn a total of  515.00  from holding X Financial Class or generate 157.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.8%
Values	Daily Returns

X Financial Class  vs.  Bayer AG NA

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.

Bayer AG NA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayer AG NA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with X Financial and Bayer AG

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

The idea behind X Financial Class and Bayer AG NA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.