Correlation Between FirstCash and Senmiao Technology

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

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

Diversification Opportunities for FirstCash and Senmiao Technology

-0.36

Correlation Coefficient

FirstCash  Senmiao Technology

Very good diversification

The 3 months correlation between FirstCash and Senmiao is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding FirstCash and Senmiao Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senmiao Technology and FirstCash 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 FirstCash 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 FirstCash i.e., FirstCash and Senmiao Technology go up and down completely randomly.

Pair Corralation between FirstCash and Senmiao Technology

Given the investment horizon of 90 days FirstCash is expected to generate 1.41 times less return on investment than Senmiao Technology. But when comparing it to its historical volatility, FirstCash is 2.88 times less risky than Senmiao Technology. It trades about 0.04 of its potential returns per unit of risk. Senmiao Technology is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  89.00  in Senmiao Technology on November 28, 2024 and sell it today you would earn a total of  0.03  from holding Senmiao Technology or generate 0.03% return on investment over 90 days.

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

FirstCash  vs.  Senmiao Technology

FirstCash

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FirstCash are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, FirstCash is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Senmiao Technology

Risk-Adjusted Performance

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.

Pair Trading with FirstCash and Senmiao Technology

The main advantage of trading using opposite FirstCash and Senmiao Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstCash 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 FirstCash 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.