Correlation Between Sensata Technologies and Astrotech Corp

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

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

Diversification Opportunities for Sensata Technologies and Astrotech Corp

-0.12

Correlation Coefficient

Sensata Technologies  Astrotech Corp

Good diversification

The 3 months correlation between Sensata and Astrotech is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sensata Technologies Holding and Astrotech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astrotech Corp and Sensata 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 Sensata Technologies Holding are associated (or correlated) with Astrotech Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astrotech Corp has no effect on the direction of Sensata Technologies i.e., Sensata Technologies and Astrotech Corp go up and down completely randomly.

Pair Corralation between Sensata Technologies and Astrotech Corp

Allowing for the 90-day total investment horizon Sensata Technologies Holding is expected to generate 0.81 times more return on investment than Astrotech Corp. However, Sensata Technologies Holding is 1.23 times less risky than Astrotech Corp. It trades about -0.05 of its potential returns per unit of risk. Astrotech Corp is currently generating about -0.04 per unit of risk. If you would invest  2,699  in Sensata Technologies Holding on December 29, 2024 and sell it today you would lose (224.00) from holding Sensata Technologies Holding or give up 8.3% of portfolio value over 90 days.

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

Sensata Technologies Holding  vs.  Astrotech Corp

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.

Astrotech Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Astrotech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Sensata Technologies and Astrotech Corp

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

The idea behind Sensata Technologies Holding and Astrotech Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.