Correlation Between Sensient Technologies and Evolution Gaming

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

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

Diversification Opportunities for Sensient Technologies and Evolution Gaming

0.55

Correlation Coefficient

Sensient Technologies  Evolution Gaming

Very weak diversification

The 3 months correlation between Sensient and Evolution is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Evolution Gaming Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Gaming 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 Evolution Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Gaming has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Evolution Gaming go up and down completely randomly.

Pair Corralation between Sensient Technologies and Evolution Gaming

Considering the 90-day investment horizon Sensient Technologies is expected to generate 0.83 times more return on investment than Evolution Gaming. However, Sensient Technologies is 1.21 times less risky than Evolution Gaming. It trades about 0.01 of its potential returns per unit of risk. Evolution Gaming Group is currently generating about -0.01 per unit of risk. If you would invest  6,955  in Sensient Technologies on December 3, 2024 and sell it today you would lose (15.00) from holding Sensient Technologies or give up 0.22% of portfolio value over 90 days.

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

Sensient Technologies  vs.  Evolution Gaming Group

Sensient Technologies

Risk-Adjusted Performance

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.

Evolution Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolution Gaming Group 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sensient Technologies and Evolution Gaming

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

The idea behind Sensient Technologies and Evolution Gaming Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.