Correlation Between T Rowe and Sensient Technologies

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

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

Diversification Opportunities for T Rowe and Sensient Technologies

0.71

Correlation Coefficient

T Rowe  Sensient Technologies

Poor diversification

The 3 months correlation between RRTLX and Sensient is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and T Rowe 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 T Rowe Price 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 T Rowe i.e., T Rowe and Sensient Technologies go up and down completely randomly.

Pair Corralation between T Rowe and Sensient Technologies

Assuming the 90 days horizon T Rowe Price is expected to generate 0.23 times more return on investment than Sensient Technologies. However, T Rowe Price is 4.43 times less risky than Sensient Technologies. It trades about 0.1 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.02 per unit of risk. If you would invest  1,082  in T Rowe Price on September 4, 2024 and sell it today you would earn a total of  189.00  from holding T Rowe Price or generate 17.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.78%
Values	Daily Returns

T Rowe Price  vs.  Sensient Technologies

T Rowe Price

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sensient Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sensient Technologies are ranked lower than 4 (%) 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 T Rowe and Sensient Technologies

The main advantage of trading using opposite T Rowe and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe 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 T Rowe Price 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.