Correlation Between Sensor Technologies and Wipro Limited

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

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

Diversification Opportunities for Sensor Technologies and Wipro Limited

0.59

Correlation Coefficient

Sensor Technologies  Wipro Limited

Very weak diversification

The 3 months correlation between Sensor and Wipro is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Sensor Technologies Corp and Wipro Limited ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wipro Limited ADR and Sensor Technologies 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 Sensor Technologies Corp are associated (or correlated) with Wipro Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wipro Limited ADR has no effect on the direction of Sensor Technologies i.e., Sensor Technologies and Wipro Limited go up and down completely randomly.

Pair Corralation between Sensor Technologies and Wipro Limited

Assuming the 90 days horizon Sensor Technologies Corp is expected to under-perform the Wipro Limited. In addition to that, Sensor Technologies is 1.1 times more volatile than Wipro Limited ADR. It trades about -0.22 of its total potential returns per unit of risk. Wipro Limited ADR is currently generating about -0.24 per unit of volatility. If you would invest  718.00  in Wipro Limited ADR on October 8, 2024 and sell it today you would lose (371.00) from holding Wipro Limited ADR or give up 51.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Sensor Technologies Corp  vs.  Wipro Limited ADR

Sensor Technologies Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sensor Technologies Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, Sensor Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Wipro Limited ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wipro Limited ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Wipro Limited unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sensor Technologies and Wipro Limited

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

The idea behind Sensor Technologies Corp and Wipro Limited ADR 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..