Correlation Between Capital Southwest and Senmiao Technology

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

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

Diversification Opportunities for Capital Southwest and Senmiao Technology

-0.78

Correlation Coefficient

Capital Southwest  Senmiao Technology

Pay attention - limited upside

The 3 months correlation between Capital and Senmiao is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Capital Southwest and Senmiao Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senmiao Technology and Capital Southwest 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 Capital Southwest 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 Capital Southwest i.e., Capital Southwest and Senmiao Technology go up and down completely randomly.

Pair Corralation between Capital Southwest and Senmiao Technology

Given the investment horizon of 90 days Capital Southwest is expected to generate 44.39 times less return on investment than Senmiao Technology. But when comparing it to its historical volatility, Capital Southwest is 107.66 times less risky than Senmiao Technology. It trades about 0.25 of its potential returns per unit of risk. Senmiao Technology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  940.00  in Senmiao Technology on May 3, 2025 and sell it today you would lose (679.00) from holding Senmiao Technology or give up 72.23% of portfolio value over 90 days.

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

Capital Southwest  vs.  Senmiao Technology

Capital Southwest

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Southwest are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Capital Southwest exhibited solid returns over the last few months and may actually be approaching a breakup point.

Senmiao Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Senmiao Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical indicators, Senmiao Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital Southwest and Senmiao Technology

The main advantage of trading using opposite Capital Southwest and Senmiao Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Southwest 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 Capital Southwest 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.