Correlation Between Senmiao Technology and Lancashire Holdings

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

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

Diversification Opportunities for Senmiao Technology and Lancashire Holdings

0.22

Correlation Coefficient

Senmiao Technology  Lancashire Holdings

Modest diversification

The 3 months correlation between Senmiao and Lancashire is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Senmiao Technology and Lancashire Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancashire Holdings 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 Lancashire Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancashire Holdings has no effect on the direction of Senmiao Technology i.e., Senmiao Technology and Lancashire Holdings go up and down completely randomly.

Pair Corralation between Senmiao Technology and Lancashire Holdings

Given the investment horizon of 90 days Senmiao Technology is expected to generate 1.98 times less return on investment than Lancashire Holdings. But when comparing it to its historical volatility, Senmiao Technology is 1.45 times less risky than Lancashire Holdings. It trades about 0.03 of its potential returns per unit of risk. Lancashire Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  805.00  in Lancashire Holdings on October 6, 2024 and sell it today you would earn a total of  26.00  from holding Lancashire Holdings or generate 3.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	71.16%
Values	Daily Returns

Senmiao Technology  vs.  Lancashire Holdings

Senmiao Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Senmiao Technology has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Lancashire Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Senmiao Technology and Lancashire Holdings

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

The idea behind Senmiao Technology and Lancashire Holdings 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.