Correlation Between X Financial and Goldman Sachs

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

Diversification Opportunities for X Financial and Goldman Sachs

0.07

Correlation Coefficient

X Financial  Goldman Sachs

Significant diversification

The 3 months correlation between XYF and Goldman is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Goldman Sachs Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Dynamic 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Dynamic has no effect on the direction of X Financial i.e., X Financial and Goldman Sachs go up and down completely randomly.

Pair Corralation between X Financial and Goldman Sachs

Considering the 90-day investment horizon X Financial Class is expected to generate 18.46 times more return on investment than Goldman Sachs. However, X Financial is 18.46 times more volatile than Goldman Sachs Dynamic. It trades about 0.11 of its potential returns per unit of risk. Goldman Sachs Dynamic is currently generating about 0.09 per unit of risk. If you would invest  346.00  in X Financial Class on October 5, 2024 and sell it today you would earn a total of  495.00  from holding X Financial Class or generate 143.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

X Financial Class  vs.  Goldman Sachs Dynamic

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.

Goldman Sachs Dynamic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldman Sachs Dynamic has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with X Financial and Goldman Sachs

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

The idea behind X Financial Class and Goldman Sachs Dynamic 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.