Correlation Between X Financial and RMB Holdings

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

Diversification Opportunities for X Financial and RMB Holdings

0.59

Correlation Coefficient

X Financial  RMB Holdings

Very weak diversification

The 3 months correlation between XYF and RMB is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and RMB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMB Holdings 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 RMB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMB Holdings has no effect on the direction of X Financial i.e., X Financial and RMB Holdings go up and down completely randomly.

Pair Corralation between X Financial and RMB Holdings

Considering the 90-day investment horizon X Financial Class is expected to generate 1.05 times more return on investment than RMB Holdings. However, X Financial is 1.05 times more volatile than RMB Holdings. It trades about 0.11 of its potential returns per unit of risk. RMB Holdings is currently generating about -0.01 per unit of risk. If you would invest  346.00  in X Financial Class on October 5, 2024 and sell it today you would earn a total of  495.00  from holding X Financial Class or generate 143.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.13%
Values	Daily Returns

X Financial Class  vs.  RMB Holdings

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.

RMB Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RMB Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, RMB Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with X Financial and RMB Holdings

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

The idea behind X Financial Class and RMB Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.