Correlation Between Falcon Power and Senao Networks

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

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

Diversification Opportunities for Falcon Power and Senao Networks

-0.53

Correlation Coefficient

Falcon Power  Senao Networks

Excellent diversification

The 3 months correlation between Falcon and Senao is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Power Co and Senao Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senao Networks and Falcon Power 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 Falcon Power Co 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 Falcon Power i.e., Falcon Power and Senao Networks go up and down completely randomly.

Pair Corralation between Falcon Power and Senao Networks

Assuming the 90 days trading horizon Falcon Power Co is expected to under-perform the Senao Networks. But the stock apears to be less risky and, when comparing its historical volatility, Falcon Power Co is 1.94 times less risky than Senao Networks. The stock trades about -0.14 of its potential returns per unit of risk. The Senao Networks is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  15,400  in Senao Networks on October 20, 2024 and sell it today you would earn a total of  2,800  from holding Senao Networks or generate 18.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Falcon Power Co  vs.  Senao Networks

Falcon Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Power Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Senao Networks

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Senao Networks are ranked lower than 6 (%) 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 Falcon Power and Senao Networks

The main advantage of trading using opposite Falcon Power and Senao Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Power 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 Falcon Power Co 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.