Correlation Between X Financial and Atea ASA

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

Diversification Opportunities for X Financial and Atea ASA

0.78

Correlation Coefficient

X Financial  Atea ASA

Poor diversification

The 3 months correlation between XYF and Atea is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Atea ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atea ASA 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 Atea ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atea ASA has no effect on the direction of X Financial i.e., X Financial and Atea ASA go up and down completely randomly.

Pair Corralation between X Financial and Atea ASA

Considering the 90-day investment horizon X Financial is expected to generate 7.05 times less return on investment than Atea ASA. But when comparing it to its historical volatility, X Financial Class is 1.41 times less risky than Atea ASA. It trades about 0.03 of its potential returns per unit of risk. Atea ASA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  780.00  in Atea ASA on October 5, 2024 and sell it today you would earn a total of  384.00  from holding Atea ASA or generate 49.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

X Financial Class  vs.  Atea ASA

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.

Atea ASA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atea ASA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Atea ASA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X Financial and Atea ASA

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

The idea behind X Financial Class and Atea ASA 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 Global Correlations module to find global opportunities by holding instruments from different markets.