Correlation Between Sensient Technologies and Johnson Matthey
Can any of the company-specific risk be diversified away by investing in both Sensient Technologies and Johnson Matthey 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 Johnson Matthey into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sensient Technologies and Johnson Matthey PLC, you can compare the effects of market volatilities on Sensient Technologies and Johnson Matthey 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 Johnson Matthey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensient Technologies and Johnson Matthey.
Diversification Opportunities for Sensient Technologies and Johnson Matthey
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sensient and Johnson is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Johnson Matthey PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Matthey PLC 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 Johnson Matthey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Matthey PLC has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Johnson Matthey go up and down completely randomly.
Pair Corralation between Sensient Technologies and Johnson Matthey
Considering the 90-day investment horizon Sensient Technologies is expected to generate 0.72 times more return on investment than Johnson Matthey. However, Sensient Technologies is 1.38 times less risky than Johnson Matthey. It trades about -0.02 of its potential returns per unit of risk. Johnson Matthey PLC is currently generating about -0.25 per unit of risk. If you would invest 7,794 in Sensient Technologies on August 30, 2024 and sell it today you would lose (85.00) from holding Sensient Technologies or give up 1.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sensient Technologies vs. Johnson Matthey PLC
Performance |
| Timeline |
| Sensient Technologies |
| Johnson Matthey PLC |
Sensient Technologies and Johnson Matthey Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sensient Technologies and Johnson Matthey
The main advantage of trading using opposite Sensient Technologies and Johnson Matthey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensient Technologies position performs unexpectedly, Johnson Matthey 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 Johnson Matthey will offset losses from the drop in Johnson Matthey's long position.| Sensient Technologies vs. Direxion Daily FTSE | Sensient Technologies vs. Collegium Pharmaceutical | Sensient Technologies vs. KKR Co LP | Sensient Technologies vs. iShares Dividend and |
| Johnson Matthey vs. Sensient Technologies | Johnson Matthey vs. Koppers Holdings | Johnson Matthey vs. Axalta Coating Systems | Johnson Matthey vs. Select Energy Services |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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