Correlation Between Oil Dri and Sensient Technologies

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

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

Diversification Opportunities for Oil Dri and Sensient Technologies

0.09

Correlation Coefficient

Oil Dri  Sensient Technologies

Significant diversification

The 3 months correlation between Oil and Sensient is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Oil Dri and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and Oil Dri 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 Oil Dri 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 Oil Dri i.e., Oil Dri and Sensient Technologies go up and down completely randomly.

Pair Corralation between Oil Dri and Sensient Technologies

Considering the 90-day investment horizon Oil Dri is expected to generate 1.28 times more return on investment than Sensient Technologies. However, Oil Dri is 1.28 times more volatile than Sensient Technologies. It trades about 0.06 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.05 per unit of risk. If you would invest  4,355  in Oil Dri on December 28, 2024 and sell it today you would earn a total of  290.00  from holding Oil Dri or generate 6.66% return on investment over 90 days.

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

Oil Dri  vs.  Sensient Technologies

Oil Dri

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Dri are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Oil Dri may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sensient Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sensient Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Oil Dri and Sensient Technologies

The main advantage of trading using opposite Oil Dri and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Dri 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 Oil Dri 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.