Correlation Between X Financial and WD 40

Can any of the company-specific risk be diversified away by investing in both X Financial and WD 40 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 WD 40 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 WD 40 CO, you can compare the effects of market volatilities on X Financial and WD 40 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 WD 40. Check out your portfolio center. Please also check ongoing floating volatility patterns of X Financial and WD 40.

Diversification Opportunities for X Financial and WD 40

-0.22

Correlation Coefficient

X Financial  WD 40

Very good diversification

The 3 months correlation between XYF and WD1 is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding X Financial Class and WD 40 CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WD 40 CO 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 WD 40. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WD 40 CO has no effect on the direction of X Financial i.e., X Financial and WD 40 go up and down completely randomly.

Pair Corralation between X Financial and WD 40

Considering the 90-day investment horizon X Financial Class is expected to under-perform the WD 40. But the stock apears to be less risky and, when comparing its historical volatility, X Financial Class is 1.23 times less risky than WD 40. The stock trades about -0.15 of its potential returns per unit of risk. The WD 40 CO is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  23,898  in WD 40 CO on October 22, 2024 and sell it today you would lose (1,698) from holding WD 40 CO or give up 7.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.21%
Values	Daily Returns

X Financial Class  vs.  WD 40 CO

X Financial Class

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in X Financial Class are ranked lower than 4 (%) 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.

WD 40 CO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WD 40 CO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with X Financial and WD 40

The main advantage of trading using opposite X Financial and WD 40 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X Financial position performs unexpectedly, WD 40 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 WD 40 will offset losses from the drop in WD 40's long position.

The idea behind X Financial Class and WD 40 CO 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.