Correlation Between Sensient Technologies and LQR House

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

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

Diversification Opportunities for Sensient Technologies and LQR House

-0.47

Correlation Coefficient

Sensient Technologies  LQR House

Very good diversification

The 3 months correlation between Sensient and LQR is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and LQR House Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LQR House Common 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 LQR House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LQR House Common has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and LQR House go up and down completely randomly.

Pair Corralation between Sensient Technologies and LQR House

Considering the 90-day investment horizon Sensient Technologies is expected to under-perform the LQR House. But the stock apears to be less risky and, when comparing its historical volatility, Sensient Technologies is 11.93 times less risky than LQR House. The stock trades about -0.53 of its potential returns per unit of risk. The LQR House Common is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  109.00  in LQR House Common on October 9, 2024 and sell it today you would earn a total of  25.00  from holding LQR House Common or generate 22.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	84.21%
Values	Daily Returns

Sensient Technologies  vs.  LQR House Common

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.

LQR House Common

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days LQR House Common has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively unfluctuating basic indicators, LQR House reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sensient Technologies and LQR House

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

The idea behind Sensient Technologies and LQR House Common 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.