Correlation Between ZKH Group and Sensient Technologies

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Can any of the company-specific risk be diversified away by investing in both ZKH Group 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 ZKH Group and Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ZKH Group Limited and Sensient Technologies, you can compare the effects of market volatilities on ZKH Group 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 ZKH Group with a short position of Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZKH Group and Sensient Technologies.

Diversification Opportunities for ZKH Group and Sensient Technologies

0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between ZKH and Sensient is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding ZKH Group Limited and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and ZKH Group 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 ZKH Group Limited 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 ZKH Group i.e., ZKH Group and Sensient Technologies go up and down completely randomly.

Pair Corralation between ZKH Group and Sensient Technologies

Considering the 90-day investment horizon ZKH Group Limited is expected to generate 2.33 times more return on investment than Sensient Technologies. However, ZKH Group is 2.33 times more volatile than Sensient Technologies. It trades about 0.12 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.07 per unit of risk. If you would invest  294.00  in ZKH Group Limited on September 12, 2024 and sell it today you would earn a total of  71.00  from holding ZKH Group Limited or generate 24.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

ZKH Group Limited  vs.  Sensient Technologies

 Performance 
       Timeline  
ZKH Group Limited 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ZKH Group Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal forward-looking signals, ZKH Group demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Sensient Technologies 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Sensient Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Sensient Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ZKH Group and Sensient Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ZKH Group and Sensient Technologies

The main advantage of trading using opposite ZKH Group and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZKH Group 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 ZKH Group Limited 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 CEOs Directory module to screen CEOs from public companies around the world.

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