Correlation Between New Advanced and Senao Networks

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

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

Diversification Opportunities for New Advanced and Senao Networks

-0.77

Correlation Coefficient

New Advanced  Senao Networks

Pay attention - limited upside

The 3 months correlation between New and Senao is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding New Advanced Electronics and Senao Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senao Networks and New Advanced 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 New Advanced Electronics 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 New Advanced i.e., New Advanced and Senao Networks go up and down completely randomly.

Pair Corralation between New Advanced and Senao Networks

Assuming the 90 days trading horizon New Advanced Electronics is expected to under-perform the Senao Networks. But the stock apears to be less risky and, when comparing its historical volatility, New Advanced Electronics is 1.93 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 0.12 of returns per unit of risk over similar time horizon. If you would invest  18,250  in Senao Networks on September 16, 2024 and sell it today you would earn a total of  1,700  from holding Senao Networks or generate 9.32% return on investment over 90 days.

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

New Advanced Electronics  vs.  Senao Networks

New Advanced Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Advanced Electronics 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 January 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 New Advanced and Senao Networks

The main advantage of trading using opposite New Advanced and Senao Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Advanced 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 New Advanced Electronics 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.