Correlation Between Senmiao Technology and Brother Industries

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

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

Diversification Opportunities for Senmiao Technology and Brother Industries

-0.47

Correlation Coefficient

Senmiao Technology  Brother Industries

Very good diversification

The 3 months correlation between Senmiao and Brother is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Senmiao Technology and Brother Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brother Industries and Senmiao Technology 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 Senmiao Technology are associated (or correlated) with Brother Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brother Industries has no effect on the direction of Senmiao Technology i.e., Senmiao Technology and Brother Industries go up and down completely randomly.

Pair Corralation between Senmiao Technology and Brother Industries

Given the investment horizon of 90 days Senmiao Technology is expected to under-perform the Brother Industries. But the stock apears to be less risky and, when comparing its historical volatility, Senmiao Technology is 1.14 times less risky than Brother Industries. The stock trades about -0.05 of its potential returns per unit of risk. The Brother Industries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,742  in Brother Industries on October 25, 2024 and sell it today you would earn a total of  98.00  from holding Brother Industries or generate 5.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.12%
Values	Daily Returns

Senmiao Technology  vs.  Brother Industries

Senmiao Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Senmiao Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, Senmiao Technology is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Brother Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brother Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Brother Industries is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Senmiao Technology and Brother Industries

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

The idea behind Senmiao Technology and Brother Industries 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.