Correlation Between Sensata Technologies and Electro Sensors

Can any of the company-specific risk be diversified away by investing in both Sensata Technologies and Electro Sensors 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 Electro Sensors 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 Electro Sensors, you can compare the effects of market volatilities on Sensata Technologies and Electro Sensors 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 Electro Sensors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensata Technologies and Electro Sensors.

Diversification Opportunities for Sensata Technologies and Electro Sensors

-0.72

Correlation Coefficient

Sensata Technologies  Electro Sensors

Pay attention - limited upside

The 3 months correlation between Sensata and Electro is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sensata Technologies Holding and Electro Sensors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electro Sensors 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 Electro Sensors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electro Sensors has no effect on the direction of Sensata Technologies i.e., Sensata Technologies and Electro Sensors go up and down completely randomly.

Pair Corralation between Sensata Technologies and Electro Sensors

Allowing for the 90-day total investment horizon Sensata Technologies Holding is expected to generate 1.1 times more return on investment than Electro Sensors. However, Sensata Technologies is 1.1 times more volatile than Electro Sensors. It trades about 0.08 of its potential returns per unit of risk. Electro Sensors is currently generating about -0.21 per unit of risk. If you would invest  2,846  in Sensata Technologies Holding on November 28, 2024 and sell it today you would earn a total of  102.00  from holding Sensata Technologies Holding or generate 3.58% return on investment over 90 days.

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

Sensata Technologies Holding  vs.  Electro Sensors

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.

Electro Sensors

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Sensata Technologies and Electro Sensors

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

The idea behind Sensata Technologies Holding and Electro Sensors 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.