Correlation Between Senmiao Technology and Sentage Holdings

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

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

Diversification Opportunities for Senmiao Technology and Sentage Holdings

0.02

Correlation Coefficient

Senmiao Technology  Sentage Holdings

Significant diversification

The 3 months correlation between Senmiao and Sentage is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Senmiao Technology and Sentage Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentage Holdings and Senmiao Technology 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 Senmiao Technology are associated (or correlated) with Sentage Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentage Holdings has no effect on the direction of Senmiao Technology i.e., Senmiao Technology and Sentage Holdings go up and down completely randomly.

Pair Corralation between Senmiao Technology and Sentage Holdings

Given the investment horizon of 90 days Senmiao Technology is expected to generate 1.94 times less return on investment than Sentage Holdings. But when comparing it to its historical volatility, Senmiao Technology is 2.02 times less risky than Sentage Holdings. It trades about 0.03 of its potential returns per unit of risk. Sentage Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  270.00  in Sentage Holdings on February 3, 2024 and sell it today you would lose (84.00) from holding Sentage Holdings or give up 31.11% of portfolio value over 90 days.

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

Senmiao Technology  vs.  Sentage Holdings

Senmiao Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Senmiao Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical indicators, Senmiao Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sentage Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sentage Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Senmiao Technology and Sentage Holdings

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

The idea behind Senmiao Technology and Sentage Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.