Correlation Between Sensient Technologies and Gulf Resources

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

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

Diversification Opportunities for Sensient Technologies and Gulf Resources

0.06

Correlation Coefficient

Sensient Technologies  Gulf Resources

Significant diversification

The 3 months correlation between Sensient and Gulf is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Gulf Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Resources 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 Gulf Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Resources has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Gulf Resources go up and down completely randomly.

Pair Corralation between Sensient Technologies and Gulf Resources

Considering the 90-day investment horizon Sensient Technologies is expected to under-perform the Gulf Resources. But the stock apears to be less risky and, when comparing its historical volatility, Sensient Technologies is 4.77 times less risky than Gulf Resources. The stock trades about -0.31 of its potential returns per unit of risk. The Gulf Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  62.00  in Gulf Resources on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Gulf Resources or generate 0.0% return on investment over 90 days.

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

Sensient Technologies  vs.  Gulf Resources

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.

Gulf Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gulf Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sensient Technologies and Gulf Resources

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

The idea behind Sensient Technologies and Gulf Resources 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.