Correlation Between Sensient Technologies and INGEVITY

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

By analyzing existing cross correlation between Sensient Technologies and INGEVITY P 3875, you can compare the effects of market volatilities on Sensient Technologies and INGEVITY 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 INGEVITY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensient Technologies and INGEVITY.

Diversification Opportunities for Sensient Technologies and INGEVITY

0.33

Correlation Coefficient

Sensient Technologies  INGEVITY

Weak diversification

The 3 months correlation between Sensient and INGEVITY is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and INGEVITY P 3875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INGEVITY P 3875 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 INGEVITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INGEVITY P 3875 has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and INGEVITY go up and down completely randomly.

Pair Corralation between Sensient Technologies and INGEVITY

Considering the 90-day investment horizon Sensient Technologies is expected to generate 0.79 times more return on investment than INGEVITY. However, Sensient Technologies is 1.26 times less risky than INGEVITY. It trades about 0.04 of its potential returns per unit of risk. INGEVITY P 3875 is currently generating about -0.25 per unit of risk. If you would invest  7,298  in Sensient Technologies on October 23, 2024 and sell it today you would earn a total of  74.00  from holding Sensient Technologies or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	72.22%
Values	Daily Returns

Sensient Technologies  vs.  INGEVITY P 3875

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.

INGEVITY P 3875

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INGEVITY P 3875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for INGEVITY P 3875 investors.

Pair Trading with Sensient Technologies and INGEVITY

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

The idea behind Sensient Technologies and INGEVITY P 3875 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.