Correlation Between MRC Global and Senmiao Technology

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

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

Diversification Opportunities for MRC Global and Senmiao Technology

-0.01

Correlation Coefficient

MRC Global  Senmiao Technology

Good diversification

The 3 months correlation between MRC and Senmiao is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding MRC Global and Senmiao Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senmiao Technology and MRC Global 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 MRC Global 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 MRC Global i.e., MRC Global and Senmiao Technology go up and down completely randomly.

Pair Corralation between MRC Global and Senmiao Technology

Considering the 90-day investment horizon MRC Global is expected to generate 0.68 times more return on investment than Senmiao Technology. However, MRC Global is 1.46 times less risky than Senmiao Technology. It trades about 0.11 of its potential returns per unit of risk. Senmiao Technology is currently generating about 0.04 per unit of risk. If you would invest  1,246  in MRC Global on October 22, 2024 and sell it today you would earn a total of  197.00  from holding MRC Global or generate 15.81% return on investment over 90 days.

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

MRC Global  vs.  Senmiao Technology

MRC Global

Risk-Adjusted Performance

8 of 100

OK

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

Senmiao Technology

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Senmiao Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Senmiao Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MRC Global and Senmiao Technology

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

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.