Correlation Between Chemtrade Logistics and Sensient Technologies

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

Diversification Opportunities for Chemtrade Logistics and Sensient Technologies

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Chemtrade and Sensient is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Chemtrade Logistics Income and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and Chemtrade Logistics 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 Chemtrade Logistics Income 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 Chemtrade Logistics i.e., Chemtrade Logistics and Sensient Technologies go up and down completely randomly.

Pair Corralation between Chemtrade Logistics and Sensient Technologies

Assuming the 90 days horizon Chemtrade Logistics Income is expected to generate 1.84 times more return on investment than Sensient Technologies. However, Chemtrade Logistics is 1.84 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 -0.08 per unit of risk. If you would invest  788.00  in Chemtrade Logistics Income on September 13, 2024 and sell it today you would earn a total of  17.00  from holding Chemtrade Logistics Income or generate 2.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.45%
ValuesDaily Returns

Chemtrade Logistics Income  vs.  Sensient Technologies

 Performance 
       Timeline  
Chemtrade Logistics 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Chemtrade Logistics Income are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Chemtrade Logistics may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Sensient Technologies 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Sensient Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Chemtrade Logistics and Sensient Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chemtrade Logistics and Sensient Technologies

The main advantage of trading using opposite Chemtrade Logistics and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemtrade Logistics 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 Chemtrade Logistics Income 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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