Correlation Between SentinelOne and ECS Botanics

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

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

Diversification Opportunities for SentinelOne and ECS Botanics

0.01

Correlation Coefficient

SentinelOne  ECS Botanics

Significant diversification

The 3 months correlation between SentinelOne and ECS is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding SentinelOne and ECS Botanics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECS Botanics Holdings and SentinelOne 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 SentinelOne are associated (or correlated) with ECS Botanics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECS Botanics Holdings has no effect on the direction of SentinelOne i.e., SentinelOne and ECS Botanics go up and down completely randomly.

Pair Corralation between SentinelOne and ECS Botanics

Taking into account the 90-day investment horizon SentinelOne is expected to under-perform the ECS Botanics. But the stock apears to be less risky and, when comparing its historical volatility, SentinelOne is 1.31 times less risky than ECS Botanics. The stock trades about -0.12 of its potential returns per unit of risk. The ECS Botanics Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1.50  in ECS Botanics Holdings on October 7, 2024 and sell it today you would earn a total of  0.20  from holding ECS Botanics Holdings or generate 13.33% return on investment over 90 days.

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

SentinelOne  vs.  ECS Botanics Holdings

SentinelOne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SentinelOne is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

ECS Botanics Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ECS Botanics Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ECS Botanics is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SentinelOne and ECS Botanics

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

The idea behind SentinelOne and ECS Botanics Holdings 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.