Correlation Between Air Products and Sensient Technologies
Can any of the company-specific risk be diversified away by investing in both Air Products 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 Air Products and Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products and and Sensient Technologies, you can compare the effects of market volatilities on Air Products 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 Air Products with a short position of Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and Sensient Technologies.
Diversification Opportunities for Air Products and Sensient Technologies
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Air and Sensient is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and Air Products 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 Air Products and 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 Air Products i.e., Air Products and Sensient Technologies go up and down completely randomly.
Pair Corralation between Air Products and Sensient Technologies
Considering the 90-day investment horizon Air Products and is expected to generate 0.54 times more return on investment than Sensient Technologies. However, Air Products and is 1.85 times less risky than Sensient Technologies. It trades about 0.23 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.02 per unit of risk. If you would invest 31,826 in Air Products and on August 28, 2024 and sell it today you would earn a total of 1,571 from holding Air Products and or generate 4.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Products and vs. Sensient Technologies
Performance |
| Timeline |
| Air Products |
| Sensient Technologies |
Air Products and Sensient Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and Sensient Technologies
The main advantage of trading using opposite Air Products and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products 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.| Air Products vs. PPG Industries | Air Products vs. Ecolab Inc | Air Products vs. Sherwin Williams Co | Air Products vs. LyondellBasell Industries NV |
| Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller | Sensient Technologies vs. Northern Technologies | Sensient Technologies vs. Cabot |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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