Correlation Between X Financial and Lufax Holding

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

Diversification Opportunities for X Financial and Lufax Holding

0.85

Correlation Coefficient

X Financial  Lufax Holding

Very poor diversification

The 3 months correlation between XYF and Lufax is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Lufax Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lufax Holding 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 Lufax Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lufax Holding has no effect on the direction of X Financial i.e., X Financial and Lufax Holding go up and down completely randomly.

Pair Corralation between X Financial and Lufax Holding

Considering the 90-day investment horizon X Financial Class is expected to generate 1.13 times more return on investment than Lufax Holding. However, X Financial is 1.13 times more volatile than Lufax Holding. It trades about 0.19 of its potential returns per unit of risk. Lufax Holding is currently generating about 0.12 per unit of risk. If you would invest  826.00  in X Financial Class on December 26, 2024 and sell it today you would earn a total of  474.00  from holding X Financial Class or generate 57.38% return on investment over 90 days.

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

X Financial Class  vs.  Lufax Holding

X Financial Class

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in X Financial Class are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, X Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Lufax Holding

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lufax Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Lufax Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X Financial and Lufax Holding

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

The idea behind X Financial Class and Lufax Holding 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.