Correlation Between X Financial and Edwards Lifesciences

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

Diversification Opportunities for X Financial and Edwards Lifesciences

0.66

Correlation Coefficient

X Financial  Edwards Lifesciences

Poor diversification

The 3 months correlation between XYF and Edwards is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Edwards Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences 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 Edwards Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edwards Lifesciences has no effect on the direction of X Financial i.e., X Financial and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between X Financial and Edwards Lifesciences

Considering the 90-day investment horizon X Financial is expected to generate 2.86 times less return on investment than Edwards Lifesciences. In addition to that, X Financial is 2.29 times more volatile than Edwards Lifesciences. It trades about 0.03 of its total potential returns per unit of risk. Edwards Lifesciences is currently generating about 0.18 per unit of volatility. If you would invest  5,956  in Edwards Lifesciences on October 5, 2024 and sell it today you would earn a total of  1,166  from holding Edwards Lifesciences or generate 19.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.16%
Values	Daily Returns

X Financial Class  vs.  Edwards Lifesciences

X Financial Class

Risk-Adjusted Performance

2 of 100

Modest

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.

Edwards Lifesciences

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Edwards Lifesciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Edwards Lifesciences reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X Financial and Edwards Lifesciences

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

The idea behind X Financial Class and Edwards Lifesciences 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.