Correlation Between Senao Networks and TWOWAY Communications
Can any of the company-specific risk be diversified away by investing in both Senao Networks and TWOWAY Communications 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 Senao Networks and TWOWAY Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Senao Networks and TWOWAY Communications, you can compare the effects of market volatilities on Senao Networks and TWOWAY Communications 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 Senao Networks with a short position of TWOWAY Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Senao Networks and TWOWAY Communications.
Diversification Opportunities for Senao Networks and TWOWAY Communications
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Senao and TWOWAY is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Senao Networks and TWOWAY Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TWOWAY Communications and Senao Networks 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 Senao Networks are associated (or correlated) with TWOWAY Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TWOWAY Communications has no effect on the direction of Senao Networks i.e., Senao Networks and TWOWAY Communications go up and down completely randomly.
Pair Corralation between Senao Networks and TWOWAY Communications
Assuming the 90 days trading horizon Senao Networks is expected to generate 0.97 times more return on investment than TWOWAY Communications. However, Senao Networks is 1.04 times less risky than TWOWAY Communications. It trades about 0.07 of its potential returns per unit of risk. TWOWAY Communications is currently generating about 0.01 per unit of risk. If you would invest 14,200 in Senao Networks on November 3, 2024 and sell it today you would earn a total of 3,950 from holding Senao Networks or generate 27.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Senao Networks vs. TWOWAY Communications
Performance |
| Timeline |
| Senao Networks |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| TWOWAY Communications |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Senao Networks and TWOWAY Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Senao Networks and TWOWAY Communications
The main advantage of trading using opposite Senao Networks and TWOWAY Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Senao Networks position performs unexpectedly, TWOWAY Communications 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 TWOWAY Communications will offset losses from the drop in TWOWAY Communications' long position.The idea behind Senao Networks and TWOWAY Communications 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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