Correlation Between Sensient Technologies and Innospec
Can any of the company-specific risk be diversified away by investing in both Sensient Technologies and Innospec 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 Innospec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sensient Technologies and Innospec, you can compare the effects of market volatilities on Sensient Technologies and Innospec 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 Innospec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensient Technologies and Innospec.
Diversification Opportunities for Sensient Technologies and Innospec
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sensient and Innospec is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Innospec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innospec 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 Innospec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innospec has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Innospec go up and down completely randomly.
Pair Corralation between Sensient Technologies and Innospec
Considering the 90-day investment horizon Sensient Technologies is expected to generate 1.42 times more return on investment than Innospec. However, Sensient Technologies is 1.42 times more volatile than Innospec. It trades about -0.06 of its potential returns per unit of risk. Innospec is currently generating about -0.18 per unit of risk. If you would invest 7,332 in Sensient Technologies on November 18, 2024 and sell it today you would lose (209.00) from holding Sensient Technologies or give up 2.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sensient Technologies vs. Innospec
Performance |
| Timeline |
| Sensient Technologies |
| Innospec |
Sensient Technologies and Innospec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sensient Technologies and Innospec
The main advantage of trading using opposite Sensient Technologies and Innospec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensient Technologies position performs unexpectedly, Innospec 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 Innospec will offset losses from the drop in Innospec's long position.| Sensient Technologies vs. Innospec | Sensient Technologies vs. Minerals Technologies | Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller |
| Innospec vs. Minerals Technologies | Innospec vs. Oil Dri | Innospec vs. Quaker Chemical | Innospec vs. Sensient Technologies |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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