Correlation Between 50249AAD5 and Sensient Technologies

Can any of the company-specific risk be diversified away by investing in both 50249AAD5 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 50249AAD5 and Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LYB INTERNATIONAL FINANCE and Sensient Technologies, you can compare the effects of market volatilities on 50249AAD5 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 50249AAD5 with a short position of Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of 50249AAD5 and Sensient Technologies.

Diversification Opportunities for 50249AAD5 and Sensient Technologies

0.23

Correlation Coefficient

50249AAD5  Sensient Technologies

Modest diversification

The 3 months correlation between 50249AAD5 and Sensient is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding LYB INTERNATIONAL FINANCE and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and 50249AAD5 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 LYB INTERNATIONAL FINANCE 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 50249AAD5 i.e., 50249AAD5 and Sensient Technologies go up and down completely randomly.

Pair Corralation between 50249AAD5 and Sensient Technologies

Assuming the 90 days trading horizon LYB INTERNATIONAL FINANCE is expected to generate 50.47 times more return on investment than Sensient Technologies. However, 50249AAD5 is 50.47 times more volatile than Sensient Technologies. It trades about 0.07 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.0 per unit of risk. If you would invest  8,072  in LYB INTERNATIONAL FINANCE on October 13, 2024 and sell it today you would lose (84.00) from holding LYB INTERNATIONAL FINANCE or give up 1.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.33%
Values	Daily Returns

LYB INTERNATIONAL FINANCE  vs.  Sensient Technologies

LYB INTERNATIONAL FINANCE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LYB INTERNATIONAL FINANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 50249AAD5 is not utilizing all of its potentials. The recent 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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with 50249AAD5 and Sensient Technologies

The main advantage of trading using opposite 50249AAD5 and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 50249AAD5 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 LYB INTERNATIONAL FINANCE 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.