Correlation Between Sensient Technologies and Westlake Chemical
Can any of the company-specific risk be diversified away by investing in both Sensient Technologies and Westlake Chemical 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 Westlake Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sensient Technologies and Westlake Chemical, you can compare the effects of market volatilities on Sensient Technologies and Westlake Chemical 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 Westlake Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensient Technologies and Westlake Chemical.
Diversification Opportunities for Sensient Technologies and Westlake Chemical
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sensient and Westlake is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Westlake Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical 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 Westlake Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westlake Chemical has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Westlake Chemical go up and down completely randomly.
Pair Corralation between Sensient Technologies and Westlake Chemical
Considering the 90-day investment horizon Sensient Technologies is expected to generate 1.44 times more return on investment than Westlake Chemical. However, Sensient Technologies is 1.44 times more volatile than Westlake Chemical. It trades about 0.25 of its potential returns per unit of risk. Westlake Chemical is currently generating about 0.15 per unit of risk. If you would invest 6,993 in Sensient Technologies on November 2, 2024 and sell it today you would earn a total of 562.00 from holding Sensient Technologies or generate 8.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sensient Technologies vs. Westlake Chemical
Performance |
| Timeline |
| Sensient Technologies |
| Westlake Chemical |
Sensient Technologies and Westlake Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sensient Technologies and Westlake Chemical
The main advantage of trading using opposite Sensient Technologies and Westlake Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensient Technologies position performs unexpectedly, Westlake Chemical 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 Westlake Chemical will offset losses from the drop in Westlake Chemical's long position.| Sensient Technologies vs. Innospec | Sensient Technologies vs. Minerals Technologies | Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller |
| Westlake Chemical vs. Sensient Technologies | Westlake Chemical vs. Innospec | Westlake Chemical vs. Minerals Technologies | Westlake Chemical vs. Oil Dri |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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