Correlation Between X Financial and Nissan Chemical

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

Diversification Opportunities for X Financial and Nissan Chemical

-0.54

Correlation Coefficient

X Financial  Nissan Chemical

Excellent diversification

The 3 months correlation between XYF and Nissan is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Nissan Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan Chemical Indu 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 Nissan Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan Chemical Indu has no effect on the direction of X Financial i.e., X Financial and Nissan Chemical go up and down completely randomly.

Pair Corralation between X Financial and Nissan Chemical

Considering the 90-day investment horizon X Financial Class is expected to generate 0.67 times more return on investment than Nissan Chemical. However, X Financial Class is 1.49 times less risky than Nissan Chemical. It trades about 0.22 of its potential returns per unit of risk. Nissan Chemical Industries is currently generating about -0.03 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  133.00  from holding X Financial Class or generate 18.79% 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.  Nissan Chemical Industries

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.

Nissan Chemical Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nissan Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Nissan Chemical 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 Nissan Chemical

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

The idea behind X Financial Class and Nissan Chemical Industries 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.