Correlation Between Sensata Technologies and Ituran Location

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

Diversification Opportunities for Sensata Technologies and Ituran Location

0.45

Correlation Coefficient

Sensata Technologies  Ituran Location

Very weak diversification

The 3 months correlation between Sensata and Ituran is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sensata Technologies Holding and Ituran Location and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ituran Location 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 Ituran Location. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ituran Location has no effect on the direction of Sensata Technologies i.e., Sensata Technologies and Ituran Location go up and down completely randomly.

Pair Corralation between Sensata Technologies and Ituran Location

Allowing for the 90-day total investment horizon Sensata Technologies is expected to generate 8.08 times less return on investment than Ituran Location. But when comparing it to its historical volatility, Sensata Technologies Holding is 1.43 times less risky than Ituran Location. It trades about 0.02 of its potential returns per unit of risk. Ituran Location and is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,946  in Ituran Location and on December 28, 2024 and sell it today you would earn a total of  742.00  from holding Ituran Location and or generate 25.19% return on investment over 90 days.

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

Sensata Technologies Holding  vs.  Ituran Location and

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.

Ituran Location

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ituran Location and are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Ituran Location displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sensata Technologies and Ituran Location

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

The idea behind Sensata Technologies Holding and Ituran Location and 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.