Correlation Between Cognex and Sensata Technologies

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

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

Diversification Opportunities for Cognex and Sensata Technologies

0.09

Correlation Coefficient

Cognex  Sensata Technologies

Significant diversification

The 3 months correlation between Cognex and Sensata is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Cognex and Sensata Technologies Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensata Technologies and Cognex 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 Cognex are associated (or correlated) with Sensata Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensata Technologies has no effect on the direction of Cognex i.e., Cognex and Sensata Technologies go up and down completely randomly.

Pair Corralation between Cognex and Sensata Technologies

Given the investment horizon of 90 days Cognex is expected to under-perform the Sensata Technologies. In addition to that, Cognex is 1.2 times more volatile than Sensata Technologies Holding. It trades about -0.29 of its total potential returns per unit of risk. Sensata Technologies Holding is currently generating about 0.08 per unit of volatility. If you would invest  2,550  in Sensata Technologies Holding on December 5, 2024 and sell it today you would earn a total of  103.00  from holding Sensata Technologies Holding or generate 4.04% return on investment over 90 days.

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

Cognex  vs.  Sensata Technologies Holding

Cognex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cognex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Sensata Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sensata Technologies Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cognex and Sensata Technologies

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

The idea behind Cognex and Sensata Technologies Holding 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.