Correlation Between Sensata Technologies and Garmin

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

Diversification Opportunities for Sensata Technologies and Garmin

0.35

Correlation Coefficient

Sensata Technologies  Garmin

Weak diversification

The 3 months correlation between Sensata and Garmin is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sensata Technologies Holding and Garmin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garmin 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 Garmin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garmin has no effect on the direction of Sensata Technologies i.e., Sensata Technologies and Garmin go up and down completely randomly.

Pair Corralation between Sensata Technologies and Garmin

Allowing for the 90-day total investment horizon Sensata Technologies is expected to generate 2.41 times less return on investment than Garmin. But when comparing it to its historical volatility, Sensata Technologies Holding is 1.0 times less risky than Garmin. It trades about 0.02 of its potential returns per unit of risk. Garmin is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  20,861  in Garmin on December 27, 2024 and sell it today you would earn a total of  822.00  from holding Garmin or generate 3.94% return on investment over 90 days.

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

Sensata Technologies Holding  vs.  Garmin

Sensata Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sensata Technologies Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sensata Technologies is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Garmin

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Garmin are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Garmin is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sensata Technologies and Garmin

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

The idea behind Sensata Technologies Holding and Garmin 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.