Correlation Between Sysco and Sensient Technologies

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

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

Diversification Opportunities for Sysco and Sensient Technologies

0.17

Correlation Coefficient

Sysco  Sensient Technologies

Average diversification

The 3 months correlation between Sysco and Sensient is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Sysco and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and Sysco 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 Sysco are associated (or correlated) with Sensient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensient Technologies has no effect on the direction of Sysco i.e., Sysco and Sensient Technologies go up and down completely randomly.

Pair Corralation between Sysco and Sensient Technologies

Considering the 90-day investment horizon Sysco is expected to generate 1.56 times less return on investment than Sensient Technologies. But when comparing it to its historical volatility, Sysco is 1.39 times less risky than Sensient Technologies. It trades about 0.01 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,166  in Sensient Technologies on October 12, 2024 and sell it today you would lose (117.00) from holding Sensient Technologies or give up 1.63% of portfolio value over 90 days.

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

Sysco  vs.  Sensient Technologies

Sysco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sysco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sysco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Sysco and Sensient Technologies

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

The idea behind Sysco and Sensient Technologies 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.