Correlation Between Air Transport and Senmiao Technology

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

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

Diversification Opportunities for Air Transport and Senmiao Technology

-0.6

Correlation Coefficient

Air Transport  Senmiao Technology

Excellent diversification

The 3 months correlation between Air and Senmiao is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Senmiao Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senmiao Technology and Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and Senmiao Technology go up and down completely randomly.

Pair Corralation between Air Transport and Senmiao Technology

Given the investment horizon of 90 days Air Transport is expected to generate 2.6 times less return on investment than Senmiao Technology. But when comparing it to its historical volatility, Air Transport Services is 1.92 times less risky than Senmiao Technology. It trades about 0.06 of its potential returns per unit of risk. Senmiao Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Senmiao Technology on September 2, 2024 and sell it today you would earn a total of  47.00  from holding Senmiao Technology or generate 111.9% return on investment over 90 days.

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

Air Transport Services  vs.  Senmiao Technology

Air Transport Services

Risk-Adjusted Performance

12 of 100

Good

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

Senmiao Technology

Risk-Adjusted Performance

0 of 100

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 fragile performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Air Transport and Senmiao Technology

The main advantage of trading using opposite Air Transport and Senmiao Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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 Air Transport Services 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.