Correlation Between Garmin and Senmiao Technology

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

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

Diversification Opportunities for Garmin and Senmiao Technology

-0.25

Correlation Coefficient

Garmin  Senmiao Technology

Very good diversification

The 3 months correlation between Garmin and Senmiao is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Garmin and Senmiao Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senmiao Technology and Garmin 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 Garmin 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 Garmin i.e., Garmin and Senmiao Technology go up and down completely randomly.

Pair Corralation between Garmin and Senmiao Technology

Given the investment horizon of 90 days Garmin is expected to under-perform the Senmiao Technology. But the stock apears to be less risky and, when comparing its historical volatility, Garmin is 3.09 times less risky than Senmiao Technology. The stock trades about -0.24 of its potential returns per unit of risk. The Senmiao Technology is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  91.00  in Senmiao Technology on October 7, 2024 and sell it today you would earn a total of  12.00  from holding Senmiao Technology or generate 13.19% return on investment over 90 days.

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

Garmin  vs.  Senmiao Technology

Garmin

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garmin are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Garmin displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Garmin and Senmiao Technology

The main advantage of trading using opposite Garmin and Senmiao Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garmin 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 Garmin 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.