Correlation Between Sensient Technologies and Arrow Financial
Can any of the company-specific risk be diversified away by investing in both Sensient Technologies and Arrow Financial 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 Sensient Technologies and Arrow Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sensient Technologies and Arrow Financial, you can compare the effects of market volatilities on Sensient Technologies and Arrow Financial 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 Sensient Technologies with a short position of Arrow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensient Technologies and Arrow Financial.
Diversification Opportunities for Sensient Technologies and Arrow Financial
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sensient and Arrow is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial and Sensient 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 Sensient Technologies are associated (or correlated) with Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Arrow Financial go up and down completely randomly.
Pair Corralation between Sensient Technologies and Arrow Financial
Considering the 90-day investment horizon Sensient Technologies is expected to generate 1.37 times less return on investment than Arrow Financial. But when comparing it to its historical volatility, Sensient Technologies is 1.43 times less risky than Arrow Financial. It trades about 0.02 of its potential returns per unit of risk. Arrow Financial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,041 in Arrow Financial on August 24, 2024 and sell it today you would earn a total of 304.00 from holding Arrow Financial or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sensient Technologies vs. Arrow Financial
Performance |
| Timeline |
| Sensient Technologies |
| Arrow Financial |
Sensient Technologies and Arrow Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sensient Technologies and Arrow Financial
The main advantage of trading using opposite Sensient Technologies and Arrow Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensient Technologies position performs unexpectedly, Arrow Financial 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 Arrow Financial will offset losses from the drop in Arrow Financial's long position.| Sensient Technologies vs. Innospec | Sensient Technologies vs. Minerals Technologies | Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller |
| Arrow Financial vs. Heritage Commerce Corp | Arrow Financial vs. Westamerica Bancorporation | Arrow Financial vs. Heritage Financial | Arrow Financial vs. National Bankshares |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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