Correlation Between 83001AAC6 and Sensient Technologies

Can any of the company-specific risk be diversified away by investing in both 83001AAC6 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 83001AAC6 and Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Six Flags Entertainment and Sensient Technologies, you can compare the effects of market volatilities on 83001AAC6 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 83001AAC6 with a short position of Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of 83001AAC6 and Sensient Technologies.

Diversification Opportunities for 83001AAC6 and Sensient Technologies

0.06

Correlation Coefficient

83001AAC6  Sensient Technologies

Significant diversification

The 3 months correlation between 83001AAC6 and Sensient is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Six Flags Entertainment and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and 83001AAC6 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 Six Flags Entertainment 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 83001AAC6 i.e., 83001AAC6 and Sensient Technologies go up and down completely randomly.

Pair Corralation between 83001AAC6 and Sensient Technologies

Assuming the 90 days trading horizon 83001AAC6 is expected to generate 1.18 times less return on investment than Sensient Technologies. But when comparing it to its historical volatility, Six Flags Entertainment is 3.6 times less risky than Sensient Technologies. It trades about 0.04 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  7,046  in Sensient Technologies on September 19, 2024 and sell it today you would earn a total of  333.00  from holding Sensient Technologies or generate 4.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	84.68%
Values	Daily Returns

Six Flags Entertainment  vs.  Sensient Technologies

Six Flags Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Six Flags Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 83001AAC6 is not utilizing all of its potentials. The newest 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 comparatively stable basic indicators, Sensient Technologies is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with 83001AAC6 and Sensient Technologies

The main advantage of trading using opposite 83001AAC6 and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 83001AAC6 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 Six Flags Entertainment 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .