Correlation Between Sensient Technologies and Koppers Holdings

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

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

Diversification Opportunities for Sensient Technologies and Koppers Holdings

0.26

Correlation Coefficient

Sensient Technologies  Koppers Holdings

Modest diversification

The 3 months correlation between Sensient and Koppers is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Koppers Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koppers Holdings 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 Koppers Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koppers Holdings has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Koppers Holdings go up and down completely randomly.

Pair Corralation between Sensient Technologies and Koppers Holdings

Considering the 90-day investment horizon Sensient Technologies is expected to generate 3.04 times less return on investment than Koppers Holdings. But when comparing it to its historical volatility, Sensient Technologies is 1.4 times less risky than Koppers Holdings. It trades about 0.01 of its potential returns per unit of risk. Koppers Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,275  in Koppers Holdings on August 31, 2024 and sell it today you would earn a total of  571.00  from holding Koppers Holdings or generate 17.44% return on investment over 90 days.

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

Sensient Technologies  vs.  Koppers Holdings

Sensient Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sensient Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sensient Technologies is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Koppers Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koppers Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Koppers Holdings is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sensient Technologies and Koppers Holdings

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

The idea behind Sensient Technologies and Koppers Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.