Correlation Between Senao International and Senao Networks

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

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

Diversification Opportunities for Senao International and Senao Networks

0.57

Correlation Coefficient

Senao International  Senao Networks

Very weak diversification

The 3 months correlation between Senao and Senao is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Senao International Co and Senao Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senao Networks and Senao International 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 Senao International 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 Senao International i.e., Senao International and Senao Networks go up and down completely randomly.

Pair Corralation between Senao International and Senao Networks

Assuming the 90 days trading horizon Senao International is expected to generate 6.24 times less return on investment than Senao Networks. But when comparing it to its historical volatility, Senao International Co is 7.3 times less risky than Senao Networks. It trades about 0.48 of its potential returns per unit of risk. Senao Networks is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  17,950  in Senao Networks on December 5, 2024 and sell it today you would earn a total of  6,600  from holding Senao Networks or generate 36.77% return on investment over 90 days.

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

Senao International Co  vs.  Senao Networks

Senao International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Senao International Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Senao International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Senao Networks

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Senao Networks are ranked lower than 5 (%) 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 Senao International and Senao Networks

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

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.