Correlation Between Sensient Technologies and Digi International
Can any of the company-specific risk be diversified away by investing in both Sensient Technologies and Digi International 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 Digi International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sensient Technologies and Digi International, you can compare the effects of market volatilities on Sensient Technologies and Digi International 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 Digi International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensient Technologies and Digi International.
Diversification Opportunities for Sensient Technologies and Digi International
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sensient and Digi is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International 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 Digi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi International has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Digi International go up and down completely randomly.
Pair Corralation between Sensient Technologies and Digi International
Considering the 90-day investment horizon Sensient Technologies is expected to generate 0.61 times more return on investment than Digi International. However, Sensient Technologies is 1.63 times less risky than Digi International. It trades about 0.02 of its potential returns per unit of risk. Digi International is currently generating about 0.0 per unit of risk. If you would invest 7,130 in Sensient Technologies on September 3, 2024 and sell it today you would earn a total of 634.00 from holding Sensient Technologies or generate 8.89% 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. Digi International
Performance |
| Timeline |
| Sensient Technologies |
| Digi International |
Sensient Technologies and Digi International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sensient Technologies and Digi International
The main advantage of trading using opposite Sensient Technologies and Digi International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensient Technologies position performs unexpectedly, Digi International 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 Digi International will offset losses from the drop in Digi International's long position.| Sensient Technologies vs. SPACE | Sensient Technologies vs. Bayview Acquisition Corp | Sensient Technologies vs. T Rowe Price | Sensient Technologies vs. Ampleforth |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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