Correlation Between Dupont De and Sensient Technologies

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

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

Diversification Opportunities for Dupont De and Sensient Technologies

0.63

Correlation Coefficient

Dupont De  Sensient Technologies

Poor diversification

The 3 months correlation between Dupont and Sensient is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and Sensient Technologies go up and down completely randomly.

Pair Corralation between Dupont De and Sensient Technologies

Allowing for the 90-day total investment horizon Dupont De is expected to generate 1.47 times less return on investment than Sensient Technologies. But when comparing it to its historical volatility, Dupont De Nemours is 1.08 times less risky than Sensient Technologies. It trades about 0.0 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,742  in Sensient Technologies on August 30, 2024 and sell it today you would lose (33.00) from holding Sensient Technologies or give up 0.43% of portfolio value over 90 days.

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

Dupont De Nemours  vs.  Sensient Technologies

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

Weak

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

Sensient Technologies

Risk-Adjusted Performance

0 of 100

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dupont De and Sensient Technologies

The main advantage of trading using opposite Dupont De and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.