Correlation Between Hexagon AB and Sensata Technologies

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

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

Diversification Opportunities for Hexagon AB and Sensata Technologies

0.07

Correlation Coefficient

Hexagon AB  Sensata Technologies

Significant diversification

The 3 months correlation between Hexagon and Sensata is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Hexagon AB ADR and Sensata Technologies Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensata Technologies and Hexagon AB 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 Hexagon AB ADR 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 Hexagon AB i.e., Hexagon AB and Sensata Technologies go up and down completely randomly.

Pair Corralation between Hexagon AB and Sensata Technologies

Assuming the 90 days horizon Hexagon AB ADR is expected to generate 0.92 times more return on investment than Sensata Technologies. However, Hexagon AB ADR is 1.09 times less risky than Sensata Technologies. It trades about 0.13 of its potential returns per unit of risk. Sensata Technologies Holding is currently generating about 0.02 per unit of risk. If you would invest  958.00  in Hexagon AB ADR on December 28, 2024 and sell it today you would earn a total of  143.00  from holding Hexagon AB ADR or generate 14.93% return on investment over 90 days.

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

Hexagon AB ADR  vs.  Sensata Technologies Holding

Hexagon AB ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hexagon AB ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental drivers, Hexagon AB showed solid returns over the last few months and may actually be approaching a breakup point.

Sensata Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sensata Technologies Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sensata 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 Hexagon AB and Sensata Technologies

The main advantage of trading using opposite Hexagon AB and Sensata Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hexagon AB 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 Hexagon AB ADR 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.