Correlation Between Sensient Technologies and Columbia Sportswear

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

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

Diversification Opportunities for Sensient Technologies and Columbia Sportswear

-0.01

Correlation Coefficient

Sensient Technologies  Columbia Sportswear

Good diversification

The 3 months correlation between Sensient and Columbia is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Columbia Sportswear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Sportswear 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 Columbia Sportswear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Sportswear has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Columbia Sportswear go up and down completely randomly.

Pair Corralation between Sensient Technologies and Columbia Sportswear

Considering the 90-day investment horizon Sensient Technologies is expected to generate 1.09 times more return on investment than Columbia Sportswear. However, Sensient Technologies is 1.09 times more volatile than Columbia Sportswear. It trades about 0.01 of its potential returns per unit of risk. Columbia Sportswear is currently generating about 0.0 per unit of risk. If you would invest  7,056  in Sensient Technologies on October 11, 2024 and sell it today you would lose (7.00) from holding Sensient Technologies or give up 0.1% of portfolio value over 90 days.

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

Sensient Technologies  vs.  Columbia Sportswear

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 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.

Columbia Sportswear

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Columbia Sportswear 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 Columbia Sportswear

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

The idea behind Sensient Technologies and Columbia Sportswear 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.

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.