Correlation Between Sensata Technologies and Teledyne Technologies

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

Diversification Opportunities for Sensata Technologies and Teledyne Technologies

-0.25

Correlation Coefficient

Sensata Technologies  Teledyne Technologies

Very good diversification

The 3 months correlation between Sensata and Teledyne is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sensata Technologies Holding and Teledyne Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teledyne Technologies 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 Teledyne Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teledyne Technologies has no effect on the direction of Sensata Technologies i.e., Sensata Technologies and Teledyne Technologies go up and down completely randomly.

Pair Corralation between Sensata Technologies and Teledyne Technologies

Allowing for the 90-day total investment horizon Sensata Technologies Holding is expected to under-perform the Teledyne Technologies. In addition to that, Sensata Technologies is 1.52 times more volatile than Teledyne Technologies Incorporated. It trades about -0.06 of its total potential returns per unit of risk. Teledyne Technologies Incorporated is currently generating about 0.05 per unit of volatility. If you would invest  48,526  in Teledyne Technologies Incorporated on November 28, 2024 and sell it today you would earn a total of  1,517  from holding Teledyne Technologies Incorporated or generate 3.13% return on investment over 90 days.

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

Sensata Technologies Holding  vs.  Teledyne Technologies Incorpor

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.

Teledyne Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Teledyne Technologies Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Teledyne Technologies 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 Teledyne Technologies

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

The idea behind Sensata Technologies Holding and Teledyne Technologies Incorporated 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.