Correlation Between X Financial and Midcap Growth

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

Diversification Opportunities for X Financial and Midcap Growth

0.57

Correlation Coefficient

X Financial  Midcap Growth

Very weak diversification

The 3 months correlation between XYF and Midcap is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Midcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth 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 Midcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Growth has no effect on the direction of X Financial i.e., X Financial and Midcap Growth go up and down completely randomly.

Pair Corralation between X Financial and Midcap Growth

Considering the 90-day investment horizon X Financial Class is expected to generate 3.4 times more return on investment than Midcap Growth. However, X Financial is 3.4 times more volatile than Midcap Growth Fund. It trades about 0.06 of its potential returns per unit of risk. Midcap Growth Fund is currently generating about 0.07 per unit of risk. If you would invest  349.00  in X Financial Class on October 4, 2024 and sell it today you would earn a total of  484.00  from holding X Financial Class or generate 138.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.96%
Values	Daily Returns

X Financial Class  vs.  Midcap Growth Fund

X Financial Class

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in X Financial Class are ranked lower than 5 (%) 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.

Midcap Growth

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days Midcap Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Midcap Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X Financial and Midcap Growth

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

The idea behind X Financial Class and Midcap Growth Fund 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.