Correlation Between X Financial and Tsmxx

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

Diversification Opportunities for X Financial and Tsmxx

-0.21

Correlation Coefficient

X Financial  Tsmxx

Very good diversification

The 3 months correlation between XYF and Tsmxx is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Tsmxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsmxx 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 Tsmxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsmxx has no effect on the direction of X Financial i.e., X Financial and Tsmxx go up and down completely randomly.

Pair Corralation between X Financial and Tsmxx

Considering the 90-day investment horizon X Financial Class is expected to under-perform the Tsmxx. But the stock apears to be less risky and, when comparing its historical volatility, X Financial Class is 27.22 times less risky than Tsmxx. The stock trades about -0.1 of its potential returns per unit of risk. The Tsmxx is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  434.00  in Tsmxx on October 21, 2024 and sell it today you would lose (334.00) from holding Tsmxx or give up 76.96% of portfolio value over 90 days.

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

X Financial Class  vs.  Tsmxx

X Financial Class

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in X Financial Class are ranked lower than 6 (%) 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.

Tsmxx

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tsmxx are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Tsmxx showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X Financial and Tsmxx

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

The idea behind X Financial Class and Tsmxx 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.