Correlation Between Vita Coco and Sensient Technologies

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

Diversification Opportunities for Vita Coco and Sensient Technologies

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Vita and Sensient is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vita Coco and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and Vita Coco 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 Vita Coco 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 Vita Coco i.e., Vita Coco and Sensient Technologies go up and down completely randomly.

Pair Corralation between Vita Coco and Sensient Technologies

Given the investment horizon of 90 days Vita Coco is expected to generate 1.02 times less return on investment than Sensient Technologies. In addition to that, Vita Coco is 1.68 times more volatile than Sensient Technologies. It trades about 0.05 of its total potential returns per unit of risk. Sensient Technologies is currently generating about 0.08 per unit of volatility. If you would invest  5,849  in Sensient Technologies on August 29, 2024 and sell it today you would earn a total of  1,951  from holding Sensient Technologies or generate 33.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Vita Coco  vs.  Sensient Technologies

 Performance 
       Timeline  
Vita Coco 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.
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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Vita Coco and Sensient Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vita Coco and Sensient Technologies

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

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