Correlation Between Sensient Technologies and SNDL

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

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

Diversification Opportunities for Sensient Technologies and SNDL

0.28

Correlation Coefficient

Sensient Technologies  SNDL

Modest diversification

The 3 months correlation between Sensient and SNDL is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc 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 SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and SNDL go up and down completely randomly.

Pair Corralation between Sensient Technologies and SNDL

Considering the 90-day investment horizon Sensient Technologies is expected to generate 0.45 times more return on investment than SNDL. However, Sensient Technologies is 2.22 times less risky than SNDL. It trades about -0.34 of its potential returns per unit of risk. SNDL Inc is currently generating about -0.2 per unit of risk. If you would invest  7,920  in Sensient Technologies on September 25, 2024 and sell it today you would lose (577.00) from holding Sensient Technologies or give up 7.29% of portfolio value over 90 days.

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

Sensient Technologies  vs.  SNDL Inc

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

SNDL Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SNDL Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Sensient Technologies and SNDL

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

The idea behind Sensient Technologies and SNDL Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.