Correlation Between X Financial and Incitec Pivot

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

Diversification Opportunities for X Financial and Incitec Pivot

-0.35

Correlation Coefficient

X Financial  Incitec Pivot

Very good diversification

The 3 months correlation between XYF and Incitec is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Incitec Pivot Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incitec Pivot 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 Incitec Pivot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incitec Pivot has no effect on the direction of X Financial i.e., X Financial and Incitec Pivot go up and down completely randomly.

Pair Corralation between X Financial and Incitec Pivot

Considering the 90-day investment horizon X Financial is expected to generate 1.78 times less return on investment than Incitec Pivot. But when comparing it to its historical volatility, X Financial Class is 1.0 times less risky than Incitec Pivot. It trades about 0.03 of its potential returns per unit of risk. Incitec Pivot Ltd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  202.00  in Incitec Pivot Ltd on October 6, 2024 and sell it today you would earn a total of  19.00  from holding Incitec Pivot Ltd or generate 9.41% return on investment over 90 days.

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

X Financial Class  vs.  Incitec Pivot Ltd

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.

Incitec Pivot

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Incitec Pivot Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Incitec Pivot showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X Financial and Incitec Pivot

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

The idea behind X Financial Class and Incitec Pivot Ltd 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 Transaction History module to view history of all your transactions and understand their impact on performance.