Correlation Between Sensient Technologies and DHC Acquisition

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

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

Diversification Opportunities for Sensient Technologies and DHC Acquisition

0.14

Correlation Coefficient

Sensient Technologies  DHC Acquisition

Average diversification

The 3 months correlation between Sensient and DHC is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and DHC Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHC Acquisition Corp 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 DHC Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHC Acquisition Corp has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and DHC Acquisition go up and down completely randomly.

Pair Corralation between Sensient Technologies and DHC Acquisition

Considering the 90-day investment horizon Sensient Technologies is expected to generate 2.83 times more return on investment than DHC Acquisition. However, Sensient Technologies is 2.83 times more volatile than DHC Acquisition Corp. It trades about 0.02 of its potential returns per unit of risk. DHC Acquisition Corp is currently generating about 0.02 per unit of risk. If you would invest  6,953  in Sensient Technologies on September 20, 2024 and sell it today you would earn a total of  693.00  from holding Sensient Technologies or generate 9.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	28.28%
Values	Daily Returns

Sensient Technologies  vs.  DHC Acquisition Corp

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.

DHC Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sensient Technologies and DHC Acquisition

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

The idea behind Sensient Technologies and DHC Acquisition Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.