Correlation Between X Financial and Pacific Capital

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

Diversification Opportunities for X Financial and Pacific Capital

-0.01

Correlation Coefficient

X Financial  Pacific Capital

Good diversification

The 3 months correlation between XYF and Pacific is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Pacific Capital Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Capital Tax 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 Pacific Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Capital Tax has no effect on the direction of X Financial i.e., X Financial and Pacific Capital go up and down completely randomly.

Pair Corralation between X Financial and Pacific Capital

Considering the 90-day investment horizon X Financial Class is expected to generate 26.7 times more return on investment than Pacific Capital. However, X Financial is 26.7 times more volatile than Pacific Capital Tax Free. It trades about 0.19 of its potential returns per unit of risk. Pacific Capital Tax Free is currently generating about -0.27 per unit of risk. If you would invest  730.00  in X Financial Class on October 6, 2024 and sell it today you would earn a total of  118.00  from holding X Financial Class or generate 16.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

X Financial Class  vs.  Pacific Capital Tax Free

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.

Pacific Capital Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Capital Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pacific Capital 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 Pacific Capital

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

The idea behind X Financial Class and Pacific Capital Tax Free 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.