Correlation Between Advanced Ceramic and Senao Networks

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

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

Diversification Opportunities for Advanced Ceramic and Senao Networks

0.39

Correlation Coefficient

Advanced Ceramic  Senao Networks

Weak diversification

The 3 months correlation between Advanced and Senao is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Ceramic X and Senao Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senao Networks and Advanced Ceramic 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 Advanced Ceramic X 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 Advanced Ceramic i.e., Advanced Ceramic and Senao Networks go up and down completely randomly.

Pair Corralation between Advanced Ceramic and Senao Networks

Assuming the 90 days trading horizon Advanced Ceramic X is expected to under-perform the Senao Networks. But the stock apears to be less risky and, when comparing its historical volatility, Advanced Ceramic X is 1.41 times less risky than Senao Networks. The stock trades about -0.01 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  17,200  in Senao Networks on September 25, 2024 and sell it today you would earn a total of  3,250  from holding Senao Networks or generate 18.9% return on investment over 90 days.

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

Advanced Ceramic X  vs.  Senao Networks

Advanced Ceramic X

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Ceramic X has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Advanced Ceramic 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

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Senao Networks are ranked lower than 7 (%) 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 Advanced Ceramic and Senao Networks

The main advantage of trading using opposite Advanced Ceramic and Senao Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Ceramic 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 Advanced Ceramic X 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.