Correlation Between Sensata Technologies and MKS Instruments

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

Diversification Opportunities for Sensata Technologies and MKS Instruments

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Correlation Coefficient

Sensata Technologies  MKS Instruments

Pay attention - limited upside

The 3 months correlation between Sensata and MKS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sensata Technologies Holding and MKS Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MKS Instruments 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 MKS Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MKS Instruments has no effect on the direction of Sensata Technologies i.e., Sensata Technologies and MKS Instruments go up and down completely randomly.

Pair Corralation between Sensata Technologies and MKS Instruments

Allowing for the 90-day total investment horizon Sensata Technologies Holding is expected to generate 0.74 times more return on investment than MKS Instruments. However, Sensata Technologies Holding is 1.34 times less risky than MKS Instruments. It trades about -0.02 of its potential returns per unit of risk. MKS Instruments is currently generating about -0.1 per unit of risk. If you would invest  2,725  in Sensata Technologies Holding on December 27, 2024 and sell it today you would lose (113.00) from holding Sensata Technologies Holding or give up 4.15% of portfolio value over 90 days.

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

Sensata Technologies Holding  vs.  MKS Instruments

Sensata Technologies

Risk-Adjusted Performance

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 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.

MKS Instruments

Risk-Adjusted Performance

Very Weak

Over the last 90 days MKS Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Sensata Technologies and MKS Instruments

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

The idea behind Sensata Technologies Holding and MKS Instruments 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.