Correlation Between Yirendai and Qudian

Can any of the company-specific risk be diversified away by investing in both Yirendai and Qudian 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 Yirendai and Qudian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yirendai and Qudian Inc, you can compare the effects of market volatilities on Yirendai and Qudian 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 Yirendai with a short position of Qudian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yirendai and Qudian.

Diversification Opportunities for Yirendai and Qudian

0.4

Correlation Coefficient

Yirendai  Qudian

Very weak diversification

The 3 months correlation between Yirendai and Qudian is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Yirendai and Qudian Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qudian Inc and Yirendai 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 Yirendai are associated (or correlated) with Qudian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qudian Inc has no effect on the direction of Yirendai i.e., Yirendai and Qudian go up and down completely randomly.

Pair Corralation between Yirendai and Qudian

Considering the 90-day investment horizon Yirendai is expected to generate 1.28 times more return on investment than Qudian. However, Yirendai is 1.28 times more volatile than Qudian Inc. It trades about 0.09 of its potential returns per unit of risk. Qudian Inc is currently generating about 0.1 per unit of risk. If you would invest  256.00  in Yirendai on February 3, 2024 and sell it today you would earn a total of  265.00  from holding Yirendai or generate 103.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Yirendai  vs.  Qudian Inc

Yirendai

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yirendai are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Yirendai exhibited solid returns over the last few months and may actually be approaching a breakup point.

Qudian Inc

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Qudian Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, Qudian exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yirendai and Qudian

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

The idea behind Yirendai and Qudian Inc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.