Correlation Between Sensient Technologies and Levi Strauss

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

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

Diversification Opportunities for Sensient Technologies and Levi Strauss

0.01

Correlation Coefficient

Sensient Technologies  Levi Strauss

Significant diversification

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

Pair Corralation between Sensient Technologies and Levi Strauss

Considering the 90-day investment horizon Sensient Technologies is expected to generate 4.41 times less return on investment than Levi Strauss. But when comparing it to its historical volatility, Sensient Technologies is 1.4 times less risky than Levi Strauss. It trades about 0.01 of its potential returns per unit of risk. Levi Strauss Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,541  in Levi Strauss Co on October 11, 2024 and sell it today you would earn a total of  245.00  from holding Levi Strauss Co or generate 15.9% 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.  Levi Strauss Co

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.

Levi Strauss

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Levi Strauss Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Levi Strauss is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Sensient Technologies and Levi Strauss

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

The idea behind Sensient Technologies and Levi Strauss Co 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.