Correlation Between Sensient Technologies and Reservoir Media
Can any of the company-specific risk be diversified away by investing in both Sensient Technologies and Reservoir Media 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 Reservoir Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sensient Technologies and Reservoir Media, you can compare the effects of market volatilities on Sensient Technologies and Reservoir Media 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 Reservoir Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensient Technologies and Reservoir Media.
Diversification Opportunities for Sensient Technologies and Reservoir Media
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sensient and Reservoir is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media 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 Reservoir Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reservoir Media has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Reservoir Media go up and down completely randomly.
Pair Corralation between Sensient Technologies and Reservoir Media
Considering the 90-day investment horizon Sensient Technologies is expected to generate 3.55 times less return on investment than Reservoir Media. But when comparing it to its historical volatility, Sensient Technologies is 1.4 times less risky than Reservoir Media. It trades about 0.02 of its potential returns per unit of risk. Reservoir Media is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 612.00 in Reservoir Media on September 2, 2024 and sell it today you would earn a total of 332.00 from holding Reservoir Media or generate 54.25% 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. Reservoir Media
Performance |
| Timeline |
| Sensient Technologies |
| Reservoir Media |
Sensient Technologies and Reservoir Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sensient Technologies and Reservoir Media
The main advantage of trading using opposite Sensient Technologies and Reservoir Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensient Technologies position performs unexpectedly, Reservoir Media 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 Reservoir Media will offset losses from the drop in Reservoir Media's long position.| Sensient Technologies vs. Innospec | Sensient Technologies vs. Minerals Technologies | Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller |
| Reservoir Media vs. Reading International | Reservoir Media vs. Marcus | Reservoir Media vs. Gaia Inc | Reservoir Media vs. News Corp B |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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