Correlation Between Lufax Holding and Credit Acceptance

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

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

Diversification Opportunities for Lufax Holding and Credit Acceptance

-0.59

Correlation Coefficient

Lufax Holding  Credit Acceptance

Excellent diversification

The 3 months correlation between Lufax and Credit is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Lufax Holding and Credit Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Acceptance and Lufax Holding 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 Lufax Holding are associated (or correlated) with Credit Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Acceptance has no effect on the direction of Lufax Holding i.e., Lufax Holding and Credit Acceptance go up and down completely randomly.

Pair Corralation between Lufax Holding and Credit Acceptance

Allowing for the 90-day total investment horizon Lufax Holding is expected to generate 4.16 times more return on investment than Credit Acceptance. However, Lufax Holding is 4.16 times more volatile than Credit Acceptance. It trades about 0.19 of its potential returns per unit of risk. Credit Acceptance is currently generating about -0.05 per unit of risk. If you would invest  269.00  in Lufax Holding on February 9, 2024 and sell it today you would earn a total of  181.00  from holding Lufax Holding or generate 67.29% return on investment over 90 days.

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

Lufax Holding  vs.  Credit Acceptance

Lufax Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lufax Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Lufax Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Credit Acceptance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credit Acceptance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Lufax Holding and Credit Acceptance

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

The idea behind Lufax Holding and Credit Acceptance 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.