Correlation Between Sensient Technologies and GENERAL

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

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

Diversification Opportunities for Sensient Technologies and GENERAL

-0.2

Correlation Coefficient

Sensient Technologies  GENERAL

Good diversification

The 3 months correlation between Sensient and GENERAL is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and GENERAL go up and down completely randomly.

Pair Corralation between Sensient Technologies and GENERAL

Considering the 90-day investment horizon Sensient Technologies is expected to generate 0.78 times more return on investment than GENERAL. However, Sensient Technologies is 1.28 times less risky than GENERAL. It trades about 0.01 of its potential returns per unit of risk. GENERAL ELEC CAP is currently generating about -0.1 per unit of risk. If you would invest  7,258  in Sensient Technologies on December 23, 2024 and sell it today you would earn a total of  20.00  from holding Sensient Technologies or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	59.02%
Values	Daily Returns

Sensient Technologies  vs.  GENERAL ELEC CAP

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 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.

GENERAL ELEC CAP

Risk-Adjusted Performance

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for GENERAL ELEC CAP investors.

Pair Trading with Sensient Technologies and GENERAL

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

The idea behind Sensient Technologies and GENERAL ELEC CAP 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .