Correlation Between Senmiao Technology and Ally Financial

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

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

Diversification Opportunities for Senmiao Technology and Ally Financial

0.49

Correlation Coefficient

Senmiao Technology  Ally Financial

Very weak diversification

The 3 months correlation between Senmiao and Ally is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Senmiao Technology and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial 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 Ally Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ally Financial has no effect on the direction of Senmiao Technology i.e., Senmiao Technology and Ally Financial go up and down completely randomly.

Pair Corralation between Senmiao Technology and Ally Financial

Given the investment horizon of 90 days Senmiao Technology is expected to under-perform the Ally Financial. In addition to that, Senmiao Technology is 2.49 times more volatile than Ally Financial. It trades about -0.08 of its total potential returns per unit of risk. Ally Financial is currently generating about 0.03 per unit of volatility. If you would invest  3,943  in Ally Financial on January 25, 2024 and sell it today you would earn a total of  33.00  from holding Ally Financial or generate 0.84% return on investment over 90 days.

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

Senmiao Technology  vs.  Ally Financial

Senmiao Technology

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Senmiao Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Senmiao Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ally Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ally Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Ally Financial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Senmiao Technology and Ally Financial

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

The idea behind Senmiao Technology and Ally Financial 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.