Correlation Between Sensata Technologies and Mesa Laboratories

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

Diversification Opportunities for Sensata Technologies and Mesa Laboratories

0.13

Correlation Coefficient

Sensata Technologies  Mesa Laboratories

Average diversification

The 3 months correlation between Sensata and Mesa is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sensata Technologies Holding and Mesa Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesa Laboratories 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 Mesa Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesa Laboratories has no effect on the direction of Sensata Technologies i.e., Sensata Technologies and Mesa Laboratories go up and down completely randomly.

Pair Corralation between Sensata Technologies and Mesa Laboratories

Allowing for the 90-day total investment horizon Sensata Technologies Holding is expected to generate 0.76 times more return on investment than Mesa Laboratories. However, Sensata Technologies Holding is 1.32 times less risky than Mesa Laboratories. It trades about 0.02 of its potential returns per unit of risk. Mesa Laboratories is currently generating about -0.02 per unit of risk. If you would invest  2,699  in Sensata Technologies Holding on December 28, 2024 and sell it today you would earn a total of  47.00  from holding Sensata Technologies Holding or generate 1.74% return on investment over 90 days.

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

Sensata Technologies Holding  vs.  Mesa Laboratories

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.

Mesa Laboratories

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mesa Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Mesa Laboratories is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sensata Technologies and Mesa Laboratories

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

The idea behind Sensata Technologies Holding and Mesa Laboratories 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.