Correlation Between Sensient Technologies and Acco Brands

Can any of the company-specific risk be diversified away by investing in both Sensient Technologies and Acco Brands 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 Sensient Technologies and Acco Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sensient Technologies and Acco Brands, you can compare the effects of market volatilities on Sensient Technologies and Acco Brands 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 Sensient Technologies with a short position of Acco Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensient Technologies and Acco Brands.

Diversification Opportunities for Sensient Technologies and Acco Brands

0.34

Correlation Coefficient

Sensient Technologies  Acco Brands

Weak diversification

The 3 months correlation between Sensient and Acco is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Acco Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acco Brands and Sensient 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 Sensient Technologies are associated (or correlated) with Acco Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acco Brands has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Acco Brands go up and down completely randomly.

Pair Corralation between Sensient Technologies and Acco Brands

Considering the 90-day investment horizon Sensient Technologies is expected to generate 0.44 times more return on investment than Acco Brands. However, Sensient Technologies is 2.28 times less risky than Acco Brands. It trades about -0.31 of its potential returns per unit of risk. Acco Brands is currently generating about -0.17 per unit of risk. If you would invest  7,867  in Sensient Technologies on September 23, 2024 and sell it today you would lose (533.00) from holding Sensient Technologies or give up 6.78% of portfolio value over 90 days.

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

Sensient Technologies  vs.  Acco Brands

Sensient Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sensient Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sensient Technologies is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Acco Brands

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Acco Brands are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Acco Brands is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sensient Technologies and Acco Brands

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

The idea behind Sensient Technologies and Acco Brands 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..