Correlation Between X Financial and Qudian

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

Diversification Opportunities for X Financial and Qudian

-0.12

Correlation Coefficient

X Financial  Qudian

Good diversification

The 3 months correlation between XYF and Qudian is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Qudian Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qudian Inc 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 Qudian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qudian Inc has no effect on the direction of X Financial i.e., X Financial and Qudian go up and down completely randomly.

Pair Corralation between X Financial and Qudian

Considering the 90-day investment horizon X Financial Class is expected to generate 1.49 times more return on investment than Qudian. However, X Financial is 1.49 times more volatile than Qudian Inc. It trades about 0.23 of its potential returns per unit of risk. Qudian Inc is currently generating about -0.03 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  705.00  from holding X Financial Class or generate 85.35% return on investment over 90 days.

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

X Financial Class  vs.  Qudian Inc

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 18 (%) 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.

Qudian Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Qudian Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Qudian is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with X Financial and Qudian

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

The idea behind X Financial Class and Qudian Inc 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.