Correlation Between X Financial and ALLSTATE

Can any of the company-specific risk be diversified away by investing in both X Financial and ALLSTATE 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 ALLSTATE 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 ALLSTATE P 328, you can compare the effects of market volatilities on X Financial and ALLSTATE 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 ALLSTATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of X Financial and ALLSTATE.

Diversification Opportunities for X Financial and ALLSTATE

-0.15

Correlation Coefficient

X Financial  ALLSTATE

Good diversification

The 3 months correlation between XYF and ALLSTATE is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and ALLSTATE P 328 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLSTATE P 328 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 ALLSTATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALLSTATE P 328 has no effect on the direction of X Financial i.e., X Financial and ALLSTATE go up and down completely randomly.

Pair Corralation between X Financial and ALLSTATE

Considering the 90-day investment horizon X Financial is expected to generate 9.18 times less return on investment than ALLSTATE. But when comparing it to its historical volatility, X Financial Class is 12.75 times less risky than ALLSTATE. It trades about 0.06 of its potential returns per unit of risk. ALLSTATE P 328 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,610  in ALLSTATE P 328 on October 20, 2024 and sell it today you would lose (109.00) from holding ALLSTATE P 328 or give up 1.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.84%
Values	Daily Returns

X Financial Class  vs.  ALLSTATE P 328

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.

ALLSTATE P 328

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALLSTATE P 328 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALLSTATE 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 ALLSTATE

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

The idea behind X Financial Class and ALLSTATE P 328 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..