Correlation Between X Financial and Vanguard Funds

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

Diversification Opportunities for X Financial and Vanguard Funds

0.61

Correlation Coefficient

X Financial  Vanguard Funds

Poor diversification

The 3 months correlation between XYF and Vanguard is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and Vanguard Funds PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Funds PLC 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 Vanguard Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Funds PLC has no effect on the direction of X Financial i.e., X Financial and Vanguard Funds go up and down completely randomly.

Pair Corralation between X Financial and Vanguard Funds

Considering the 90-day investment horizon X Financial Class is expected to generate 6.79 times more return on investment than Vanguard Funds. However, X Financial is 6.79 times more volatile than Vanguard Funds PLC. It trades about 0.07 of its potential returns per unit of risk. Vanguard Funds PLC is currently generating about 0.11 per unit of risk. If you would invest  734.00  in X Financial Class on October 4, 2024 and sell it today you would earn a total of  107.00  from holding X Financial Class or generate 14.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

X Financial Class  vs.  Vanguard Funds PLC

X Financial Class

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in X Financial Class are ranked lower than 5 (%) 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.

Vanguard Funds PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Vanguard Funds is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with X Financial and Vanguard Funds

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

The idea behind X Financial Class and Vanguard Funds PLC 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.