Correlation Between Sensient Technologies and SOUTHERN

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

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

Diversification Opportunities for Sensient Technologies and SOUTHERN

0.15

Correlation Coefficient

Sensient Technologies  SOUTHERN

Average diversification

The 3 months correlation between Sensient and SOUTHERN is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and SOUTHERN PER CORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHERN PER P 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 SOUTHERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUTHERN PER P has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and SOUTHERN go up and down completely randomly.

Pair Corralation between Sensient Technologies and SOUTHERN

Considering the 90-day investment horizon Sensient Technologies is expected to generate 135.68 times less return on investment than SOUTHERN. But when comparing it to its historical volatility, Sensient Technologies is 31.22 times less risky than SOUTHERN. It trades about 0.01 of its potential returns per unit of risk. SOUTHERN PER CORP is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  11,184  in SOUTHERN PER CORP on September 25, 2024 and sell it today you would lose (167.00) from holding SOUTHERN PER CORP or give up 1.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.41%
Values	Daily Returns

Sensient Technologies  vs.  SOUTHERN PER CORP

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.

SOUTHERN PER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOUTHERN PER CORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SOUTHERN is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sensient Technologies and SOUTHERN

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

The idea behind Sensient Technologies and SOUTHERN PER CORP 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.