Correlation Between Spectris Plc and Sensata Technologies

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

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

Diversification Opportunities for Spectris Plc and Sensata Technologies

0.11

Correlation Coefficient

Spectris Plc  Sensata Technologies

Average diversification

The 3 months correlation between Spectris and Sensata is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Spectris plc and Sensata Technologies Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensata Technologies and Spectris Plc 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 Spectris plc 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 Spectris Plc i.e., Spectris Plc and Sensata Technologies go up and down completely randomly.

Pair Corralation between Spectris Plc and Sensata Technologies

Assuming the 90 days horizon Spectris plc is expected to generate 1.46 times more return on investment than Sensata Technologies. However, Spectris Plc is 1.46 times more volatile than Sensata Technologies Holding. It trades about 0.04 of its potential returns per unit of risk. Sensata Technologies Holding is currently generating about -0.05 per unit of risk. If you would invest  2,935  in Spectris plc on December 29, 2024 and sell it today you would earn a total of  123.00  from holding Spectris plc or generate 4.19% return on investment over 90 days.

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

Spectris plc  vs.  Sensata Technologies Holding

Spectris plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Spectris plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting forward-looking indicators, Spectris Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sensata Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sensata Technologies Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Spectris Plc and Sensata Technologies

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

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.