Correlation Between Sensient Technologies and Union Electric
Can any of the company-specific risk be diversified away by investing in both Sensient Technologies and Union Electric 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 Union Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sensient Technologies and Union Electric, you can compare the effects of market volatilities on Sensient Technologies and Union Electric 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 Union Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensient Technologies and Union Electric.
Diversification Opportunities for Sensient Technologies and Union Electric
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sensient and Union is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Union Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Electric 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 Union Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Electric has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Union Electric go up and down completely randomly.
Pair Corralation between Sensient Technologies and Union Electric
Considering the 90-day investment horizon Sensient Technologies is expected to generate 1.64 times less return on investment than Union Electric. But when comparing it to its historical volatility, Sensient Technologies is 1.37 times less risky than Union Electric. It trades about 0.05 of its potential returns per unit of risk. Union Electric is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8,700 in Union Electric on December 28, 2024 and sell it today you would earn a total of 500.00 from holding Union Electric or generate 5.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 91.67% |
Values | Daily Returns |
Sensient Technologies vs. Union Electric
Performance |
Timeline |
Sensient Technologies |
Union Electric |
Sensient Technologies and Union Electric Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sensient Technologies and Union Electric
The main advantage of trading using opposite Sensient Technologies and Union Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensient Technologies position performs unexpectedly, Union Electric 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 Union Electric will offset losses from the drop in Union Electric's long position.Sensient Technologies vs. Oil Dri | Sensient Technologies vs. Quaker Chemical | Sensient Technologies vs. Ecovyst | Sensient Technologies vs. Element Solutions |
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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.
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