Correlation Between Sensient Technologies and XChange TECINC

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

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

Diversification Opportunities for Sensient Technologies and XChange TECINC

0.41

Correlation Coefficient

Sensient Technologies  XChange TECINC

Very weak diversification

The 3 months correlation between Sensient and XChange is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and XChange TECINC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XChange TECINC 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 XChange TECINC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XChange TECINC has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and XChange TECINC go up and down completely randomly.

Pair Corralation between Sensient Technologies and XChange TECINC

Considering the 90-day investment horizon Sensient Technologies is expected to generate 0.1 times more return on investment than XChange TECINC. However, Sensient Technologies is 10.48 times less risky than XChange TECINC. It trades about -0.1 of its potential returns per unit of risk. XChange TECINC is currently generating about -0.1 per unit of risk. If you would invest  7,744  in Sensient Technologies on October 12, 2024 and sell it today you would lose (695.00) from holding Sensient Technologies or give up 8.97% of portfolio value over 90 days.

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

Sensient Technologies  vs.  XChange TECINC

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

XChange TECINC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XChange TECINC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sensient Technologies and XChange TECINC

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

The idea behind Sensient Technologies and XChange TECINC 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.

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 CEOs Directory module to screen CEOs from public companies around the world.