Correlation Between Reward Wool and Senao Networks

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

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

Diversification Opportunities for Reward Wool and Senao Networks

-0.52

Correlation Coefficient

Reward Wool  Senao Networks

Excellent diversification

The 3 months correlation between Reward and Senao is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Reward Wool Industry and Senao Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senao Networks and Reward Wool 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 Reward Wool Industry are associated (or correlated) with Senao Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senao Networks has no effect on the direction of Reward Wool i.e., Reward Wool and Senao Networks go up and down completely randomly.

Pair Corralation between Reward Wool and Senao Networks

Assuming the 90 days trading horizon Reward Wool Industry is expected to generate 0.63 times more return on investment than Senao Networks. However, Reward Wool Industry is 1.58 times less risky than Senao Networks. It trades about 0.08 of its potential returns per unit of risk. Senao Networks is currently generating about 0.01 per unit of risk. If you would invest  2,030  in Reward Wool Industry on September 17, 2024 and sell it today you would earn a total of  1,890  from holding Reward Wool Industry or generate 93.1% return on investment over 90 days.

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

Reward Wool Industry  vs.  Senao Networks

Reward Wool Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reward Wool Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Senao Networks

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Senao Networks are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Senao Networks showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reward Wool and Senao Networks

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

The idea behind Reward Wool Industry and Senao Networks 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .