Correlation Between Precision Optics, and Senmiao Technology

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

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

Diversification Opportunities for Precision Optics, and Senmiao Technology

0.29

Correlation Coefficient

Precision Optics,  Senmiao Technology

Modest diversification

The 3 months correlation between Precision and Senmiao is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Precision Optics, and Senmiao Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senmiao Technology and Precision Optics, 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 Precision Optics, 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 Precision Optics, i.e., Precision Optics, and Senmiao Technology go up and down completely randomly.

Pair Corralation between Precision Optics, and Senmiao Technology

Given the investment horizon of 90 days Precision Optics, is expected to under-perform the Senmiao Technology. But the stock apears to be less risky and, when comparing its historical volatility, Precision Optics, is 1.3 times less risky than Senmiao Technology. The stock trades about -0.02 of its potential returns per unit of risk. The Senmiao Technology is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  93.00  in Senmiao Technology on December 21, 2024 and sell it today you would lose (4.00) from holding Senmiao Technology or give up 4.3% of portfolio value over 90 days.

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

Precision Optics,  vs.  Senmiao Technology

Precision Optics,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Precision Optics, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Precision Optics, is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Senmiao Technology

Risk-Adjusted Performance

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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Precision Optics, and Senmiao Technology

The main advantage of trading using opposite Precision Optics, and Senmiao Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precision Optics, 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 Precision Optics, 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.