Correlation Between Sensient Technologies and Lifevantage

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

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

Diversification Opportunities for Sensient Technologies and Lifevantage

-0.23

Correlation Coefficient

Sensient Technologies  Lifevantage

Very good diversification

The 3 months correlation between Sensient and Lifevantage is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Lifevantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifevantage 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 Lifevantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifevantage has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Lifevantage go up and down completely randomly.

Pair Corralation between Sensient Technologies and Lifevantage

Considering the 90-day investment horizon Sensient Technologies is expected to generate 26.06 times less return on investment than Lifevantage. But when comparing it to its historical volatility, Sensient Technologies is 2.94 times less risky than Lifevantage. It trades about 0.01 of its potential returns per unit of risk. Lifevantage is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  307.00  in Lifevantage on December 3, 2024 and sell it today you would earn a total of  1,410  from holding Lifevantage or generate 459.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Sensient Technologies  vs.  Lifevantage

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.

Lifevantage

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lifevantage are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Lifevantage displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sensient Technologies and Lifevantage

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

The idea behind Sensient Technologies and Lifevantage 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.