Correlation Between Stepan and Senmiao Technology
Can any of the company-specific risk be diversified away by investing in both Stepan 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 Stepan and Senmiao Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Senmiao Technology, you can compare the effects of market volatilities on Stepan 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 Stepan with a short position of Senmiao Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Senmiao Technology.
Diversification Opportunities for Stepan and Senmiao Technology
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Stepan and Senmiao is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Senmiao Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senmiao Technology and Stepan 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 Stepan Company 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 Stepan i.e., Stepan and Senmiao Technology go up and down completely randomly.
Pair Corralation between Stepan and Senmiao Technology
Considering the 90-day investment horizon Stepan Company is expected to under-perform the Senmiao Technology. But the stock apears to be less risky and, when comparing its historical volatility, Stepan Company is 3.49 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 0.04 of returns per unit of risk over similar time horizon. If you would invest 77.00 in Senmiao Technology on September 1, 2024 and sell it today you would earn a total of 12.00 from holding Senmiao Technology or generate 15.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Senmiao Technology
Performance |
| Timeline |
| Stepan Company |
| Senmiao Technology |
Stepan and Senmiao Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Senmiao Technology
The main advantage of trading using opposite Stepan and Senmiao Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan 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 Stepan Company 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.| Senmiao Technology vs. X Financial Class | Senmiao Technology vs. Yirendai | Senmiao Technology vs. Pintec Technology Holdings | Senmiao Technology vs. Qudian Inc |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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