Correlation Between Sensient Technologies and Montauk Renewables
Can any of the company-specific risk be diversified away by investing in both Sensient Technologies and Montauk Renewables 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 Montauk Renewables into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sensient Technologies and Montauk Renewables, you can compare the effects of market volatilities on Sensient Technologies and Montauk Renewables 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 Montauk Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensient Technologies and Montauk Renewables.
Diversification Opportunities for Sensient Technologies and Montauk Renewables
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sensient and Montauk is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables 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 Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Montauk Renewables go up and down completely randomly.
Pair Corralation between Sensient Technologies and Montauk Renewables
Considering the 90-day investment horizon Sensient Technologies is expected to generate 0.3 times more return on investment than Montauk Renewables. However, Sensient Technologies is 3.28 times less risky than Montauk Renewables. It trades about 0.1 of its potential returns per unit of risk. Montauk Renewables is currently generating about -0.15 per unit of risk. If you would invest 7,507 in Sensient Technologies on September 1, 2024 and sell it today you would earn a total of 257.00 from holding Sensient Technologies or generate 3.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sensient Technologies vs. Montauk Renewables
Performance |
| Timeline |
| Sensient Technologies |
| Montauk Renewables |
Sensient Technologies and Montauk Renewables Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sensient Technologies and Montauk Renewables
The main advantage of trading using opposite Sensient Technologies and Montauk Renewables positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensient Technologies position performs unexpectedly, Montauk Renewables 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 Montauk Renewables will offset losses from the drop in Montauk Renewables' long position.| Sensient Technologies vs. Innospec | Sensient Technologies vs. Minerals Technologies | Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller |
| Montauk Renewables vs. Avista | Montauk Renewables vs. Allete Inc | Montauk Renewables vs. Black Hills | Montauk Renewables vs. Companhia Paranaense de |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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