Correlation Between Alcoa Corp and Senmiao Technology

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

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

Diversification Opportunities for Alcoa Corp and Senmiao Technology

-0.24

Correlation Coefficient

Alcoa Corp  Senmiao Technology

Very good diversification

The 3 months correlation between Alcoa and Senmiao is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Senmiao Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senmiao Technology and Alcoa Corp 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 Alcoa Corp are associated (or correlated) with Senmiao Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senmiao Technology has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Senmiao Technology go up and down completely randomly.

Pair Corralation between Alcoa Corp and Senmiao Technology

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Senmiao Technology. But the stock apears to be less risky and, when comparing its historical volatility, Alcoa Corp is 1.4 times less risky than Senmiao Technology. The stock trades about -0.02 of its potential returns per unit of risk. The Senmiao Technology is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  83.00  in Senmiao Technology on October 22, 2024 and sell it today you would earn a total of  4.00  from holding Senmiao Technology or generate 4.82% return on investment over 90 days.

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

Alcoa Corp  vs.  Senmiao Technology

Alcoa Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Alcoa Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Senmiao Technology

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Senmiao Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Senmiao Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Alcoa Corp and Senmiao Technology

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

The idea behind Alcoa Corp and Senmiao Technology 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.