Correlation Between Guangdong Investment and Sensient Technologies
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment 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 Guangdong Investment and Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment Limited and Sensient Technologies, you can compare the effects of market volatilities on Guangdong Investment 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 Guangdong Investment with a short position of Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Sensient Technologies.
Diversification Opportunities for Guangdong Investment and Sensient Technologies
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Guangdong and Sensient is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and Guangdong Investment 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 Guangdong Investment 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 Guangdong Investment i.e., Guangdong Investment and Sensient Technologies go up and down completely randomly.
Pair Corralation between Guangdong Investment and Sensient Technologies
Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 0.17 times more return on investment than Sensient Technologies. However, Guangdong Investment Limited is 5.79 times less risky than Sensient Technologies. It trades about 0.24 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.04 per unit of risk. If you would invest 79.00 in Guangdong Investment Limited on October 22, 2024 and sell it today you would earn a total of 1.00 from holding Guangdong Investment Limited or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Guangdong Investment Limited vs. Sensient Technologies
Performance |
| Timeline |
| Guangdong Investment |
| Sensient Technologies |
Guangdong Investment and Sensient Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and Sensient Technologies
The main advantage of trading using opposite Guangdong Investment and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment 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.| Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Guangdong Investment | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Beijing Enterprises Water |
| Sensient Technologies vs. Innospec | Sensient Technologies vs. Minerals Technologies | Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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