Correlation Between World Acceptance and Senmiao Technology

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

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

Diversification Opportunities for World Acceptance and Senmiao Technology

-0.37

Correlation Coefficient

World Acceptance  Senmiao Technology

Very good diversification

The 3 months correlation between World and Senmiao is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding World Acceptance and Senmiao Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senmiao Technology and World Acceptance 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 World Acceptance 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 World Acceptance i.e., World Acceptance and Senmiao Technology go up and down completely randomly.

Pair Corralation between World Acceptance and Senmiao Technology

Given the investment horizon of 90 days World Acceptance is expected to under-perform the Senmiao Technology. But the stock apears to be less risky and, when comparing its historical volatility, World Acceptance is 1.45 times less risky than Senmiao Technology. The stock trades about -0.26 of its potential returns per unit of risk. The Senmiao Technology is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  89.00  in Senmiao Technology on October 1, 2024 and sell it today you would earn a total of  9.00  from holding Senmiao Technology or generate 10.11% return on investment over 90 days.

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

World Acceptance  vs.  Senmiao Technology

World Acceptance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days World Acceptance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, World Acceptance is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 latest weak performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with World Acceptance and Senmiao Technology

The main advantage of trading using opposite World Acceptance and Senmiao Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Acceptance 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 World Acceptance 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.