Correlation Between SBM Offshore and Sensient Technologies
Can any of the company-specific risk be diversified away by investing in both SBM Offshore 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 SBM Offshore and Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM Offshore NV and Sensient Technologies, you can compare the effects of market volatilities on SBM Offshore 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 SBM Offshore with a short position of Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Sensient Technologies.
Diversification Opportunities for SBM Offshore and Sensient Technologies
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SBM and Sensient is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and SBM Offshore 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 SBM Offshore NV 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 SBM Offshore i.e., SBM Offshore and Sensient Technologies go up and down completely randomly.
Pair Corralation between SBM Offshore and Sensient Technologies
Assuming the 90 days horizon SBM Offshore is expected to generate 1.52 times less return on investment than Sensient Technologies. But when comparing it to its historical volatility, SBM Offshore NV is 2.28 times less risky than Sensient Technologies. It trades about 0.14 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 7,507 in Sensient Technologies on September 1, 2024 and sell it today you would earn a total of 257.00 from holding Sensient Technologies or generate 3.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM Offshore NV vs. Sensient Technologies
Performance |
| Timeline |
| SBM Offshore NV |
| Sensient Technologies |
SBM Offshore and Sensient Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and Sensient Technologies
The main advantage of trading using opposite SBM Offshore and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore 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.| SBM Offshore vs. Expro Group Holdings | SBM Offshore vs. ChampionX | SBM Offshore vs. Ranger Energy Services | SBM Offshore vs. Cactus Inc |
| 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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Stocks Directory Find actively traded stocks across global markets | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |