Correlation Between Sentage Holdings and Yirendai

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

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

Diversification Opportunities for Sentage Holdings and Yirendai

-0.3

Correlation Coefficient

Sentage Holdings  Yirendai

Very good diversification

The 3 months correlation between Sentage and Yirendai is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sentage Holdings and Yirendai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yirendai and Sentage Holdings 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 Sentage Holdings are associated (or correlated) with Yirendai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yirendai has no effect on the direction of Sentage Holdings i.e., Sentage Holdings and Yirendai go up and down completely randomly.

Pair Corralation between Sentage Holdings and Yirendai

Given the investment horizon of 90 days Sentage Holdings is expected to under-perform the Yirendai. In addition to that, Sentage Holdings is 1.36 times more volatile than Yirendai. It trades about -0.01 of its total potential returns per unit of risk. Yirendai is currently generating about 0.16 per unit of volatility. If you would invest  503.00  in Yirendai on November 28, 2024 and sell it today you would earn a total of  182.00  from holding Yirendai or generate 36.18% return on investment over 90 days.

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

Sentage Holdings  vs.  Yirendai

Sentage Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sentage Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sentage Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Yirendai

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yirendai are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Yirendai exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sentage Holdings and Yirendai

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

The idea behind Sentage Holdings and Yirendai 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.