Correlation Between Senmiao Technology and United Fire

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

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

Diversification Opportunities for Senmiao Technology and United Fire

-0.41

Correlation Coefficient

Senmiao Technology  United Fire

Very good diversification

The 3 months correlation between Senmiao and United is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Senmiao Technology and United Fire Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Fire Group 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 United Fire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Fire Group has no effect on the direction of Senmiao Technology i.e., Senmiao Technology and United Fire go up and down completely randomly.

Pair Corralation between Senmiao Technology and United Fire

Given the investment horizon of 90 days Senmiao Technology is expected to under-perform the United Fire. But the stock apears to be less risky and, when comparing its historical volatility, Senmiao Technology is 1.01 times less risky than United Fire. The stock trades about -0.17 of its potential returns per unit of risk. The United Fire Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,991  in United Fire Group on September 12, 2024 and sell it today you would earn a total of  1,084  from holding United Fire Group or generate 54.45% return on investment over 90 days.

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

Senmiao Technology  vs.  United Fire Group

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 weak performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

United Fire Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Fire Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, United Fire unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Senmiao Technology and United Fire

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

The idea behind Senmiao Technology and United Fire Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.