Correlation Between SPACE and Sensient Technologies
Can any of the company-specific risk be diversified away by investing in both SPACE 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 SPACE and Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPACE and Sensient Technologies, you can compare the effects of market volatilities on SPACE 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 SPACE with a short position of Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPACE and Sensient Technologies.
Diversification Opportunities for SPACE and Sensient Technologies
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SPACE and Sensient is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and SPACE 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 SPACE 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 SPACE i.e., SPACE and Sensient Technologies go up and down completely randomly.
Pair Corralation between SPACE and Sensient Technologies
Assuming the 90 days horizon SPACE is expected to generate 110.5 times more return on investment than Sensient Technologies. However, SPACE is 110.5 times more volatile than Sensient Technologies. It trades about 0.18 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.02 per unit of risk. If you would invest 0.00 in SPACE on September 3, 2024 and sell it today you would earn a total of 59.00 from holding SPACE or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 61.82% |
| Values | Daily Returns |
SPACE vs. Sensient Technologies
Performance |
| Timeline |
| SPACE |
| Sensient Technologies |
SPACE and Sensient Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPACE and Sensient Technologies
The main advantage of trading using opposite SPACE and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPACE 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 SPACE 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.| Sensient Technologies vs. SPACE | Sensient Technologies vs. Bayview Acquisition Corp | Sensient Technologies vs. T Rowe Price | Sensient Technologies vs. Ampleforth |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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