Correlation Between Sensata Technologies and Global Payments
Can any of the company-specific risk be diversified away by investing in both Sensata Technologies and Global Payments 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 Sensata Technologies and Global Payments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sensata Technologies Holding and Global Payments, you can compare the effects of market volatilities on Sensata Technologies and Global Payments 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 Sensata Technologies with a short position of Global Payments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensata Technologies and Global Payments.
Diversification Opportunities for Sensata Technologies and Global Payments
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sensata and Global is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sensata Technologies Holding and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments and Sensata Technologies 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 Sensata Technologies Holding are associated (or correlated) with Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of Sensata Technologies i.e., Sensata Technologies and Global Payments go up and down completely randomly.
Pair Corralation between Sensata Technologies and Global Payments
Allowing for the 90-day total investment horizon Sensata Technologies Holding is expected to under-perform the Global Payments. In addition to that, Sensata Technologies is 1.03 times more volatile than Global Payments. It trades about -0.08 of its total potential returns per unit of risk. Global Payments is currently generating about 0.09 per unit of volatility. If you would invest 9,859 in Global Payments on August 31, 2024 and sell it today you would earn a total of 2,037 from holding Global Payments or generate 20.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sensata Technologies Holding vs. Global Payments
Performance |
| Timeline |
| Sensata Technologies |
| Global Payments |
Sensata Technologies and Global Payments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sensata Technologies and Global Payments
The main advantage of trading using opposite Sensata Technologies and Global Payments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensata Technologies position performs unexpectedly, Global Payments 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 Global Payments will offset losses from the drop in Global Payments' long position.| Sensata Technologies vs. Coherent | Sensata Technologies vs. ESCO Technologies | Sensata Technologies vs. Mesa Laboratories | Sensata Technologies vs. Vishay Precision Group |
| Global Payments vs. Copart Inc | Global Payments vs. ABM Industries Incorporated | Global Payments vs. Thomson Reuters Corp | Global Payments vs. Aramark Holdings |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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