Correlation Between Jacobs Solutions and Sensient Technologies
Can any of the company-specific risk be diversified away by investing in both Jacobs Solutions 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 Jacobs Solutions and Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jacobs Solutions and Sensient Technologies, you can compare the effects of market volatilities on Jacobs Solutions 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 Jacobs Solutions with a short position of Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jacobs Solutions and Sensient Technologies.
Diversification Opportunities for Jacobs Solutions and Sensient Technologies
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Jacobs and Sensient is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and Jacobs Solutions 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 Jacobs Solutions 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 Jacobs Solutions i.e., Jacobs Solutions and Sensient Technologies go up and down completely randomly.
Pair Corralation between Jacobs Solutions and Sensient Technologies
Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 0.86 times more return on investment than Sensient Technologies. However, Jacobs Solutions is 1.17 times less risky than Sensient Technologies. It trades about 0.09 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.07 per unit of risk. If you would invest 10,627 in Jacobs Solutions on September 2, 2024 and sell it today you would earn a total of 3,496 from holding Jacobs Solutions or generate 32.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jacobs Solutions vs. Sensient Technologies
Performance |
| Timeline |
| Jacobs Solutions |
| Sensient Technologies |
Jacobs Solutions and Sensient Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jacobs Solutions and Sensient Technologies
The main advantage of trading using opposite Jacobs Solutions and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jacobs Solutions 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.| Jacobs Solutions vs. KBR Inc | Jacobs Solutions vs. Tetra Tech | Jacobs Solutions vs. Fluor | Jacobs Solutions vs. Topbuild Corp |
| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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