Correlation Between ClearOne and Sensient Technologies

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

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

Diversification Opportunities for ClearOne and Sensient Technologies

-0.05

Correlation Coefficient

ClearOne  Sensient Technologies

Good diversification

The 3 months correlation between ClearOne and Sensient is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding ClearOne and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and ClearOne 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 ClearOne are associated (or correlated) with Sensient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensient Technologies has no effect on the direction of ClearOne i.e., ClearOne and Sensient Technologies go up and down completely randomly.

Pair Corralation between ClearOne and Sensient Technologies

Given the investment horizon of 90 days ClearOne is expected to generate 4.84 times more return on investment than Sensient Technologies. However, ClearOne is 4.84 times more volatile than Sensient Technologies. It trades about 0.03 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.02 per unit of risk. If you would invest  43.00  in ClearOne on September 20, 2024 and sell it today you would earn a total of  12.00  from holding ClearOne or generate 27.91% return on investment over 90 days.

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

ClearOne  vs.  Sensient Technologies

ClearOne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ClearOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ClearOne is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Sensient Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sensient Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sensient Technologies is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ClearOne and Sensient Technologies

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

The idea behind ClearOne and Sensient Technologies 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.