Correlation Between Senmiao Technology and Waters

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

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

Diversification Opportunities for Senmiao Technology and Waters

-0.47

Correlation Coefficient

Senmiao Technology  Waters

Very good diversification

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

Pair Corralation between Senmiao Technology and Waters

Given the investment horizon of 90 days Senmiao Technology is expected to under-perform the Waters. In addition to that, Senmiao Technology is 1.22 times more volatile than Waters. It trades about -0.15 of its total potential returns per unit of risk. Waters is currently generating about 0.1 per unit of volatility. If you would invest  32,586  in Waters on September 13, 2024 and sell it today you would earn a total of  5,941  from holding Waters or generate 18.23% 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.  Waters

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 abnormal 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.

Waters

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Waters unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Senmiao Technology and Waters

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

The idea behind Senmiao Technology and Waters 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.