Correlation Between X Financial and Health Care

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

Diversification Opportunities for X Financial and Health Care

-0.53

Correlation Coefficient

X Financial  Health Care

Excellent diversification

The 3 months correlation between XYF and Health is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Health Care Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Services 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Services has no effect on the direction of X Financial i.e., X Financial and Health Care go up and down completely randomly.

Pair Corralation between X Financial and Health Care

Considering the 90-day investment horizon X Financial Class is expected to generate 1.72 times more return on investment than Health Care. However, X Financial is 1.72 times more volatile than Health Care Services. It trades about 0.22 of its potential returns per unit of risk. Health Care Services is currently generating about -0.47 per unit of risk. If you would invest  708.00  in X Financial Class on October 5, 2024 and sell it today you would earn a total of  140.00  from holding X Financial Class or generate 19.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

X Financial Class  vs.  Health Care Services

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.

Health Care Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Care Services has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with X Financial and Health Care

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

The idea behind X Financial Class and Health Care Services 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.