Correlation Between Waters and Sensient Technologies
Can any of the company-specific risk be diversified away by investing in both Waters and Sensient Technologies 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 Waters and Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waters and Sensient Technologies, you can compare the effects of market volatilities on Waters and Sensient Technologies 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 Waters with a short position of Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waters and Sensient Technologies.
Diversification Opportunities for Waters and Sensient Technologies
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Waters and Sensient is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and Waters 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 Waters are associated (or correlated) with Sensient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensient Technologies has no effect on the direction of Waters i.e., Waters and Sensient Technologies go up and down completely randomly.
Pair Corralation between Waters and Sensient Technologies
Considering the 90-day investment horizon Waters is expected to generate 1.28 times more return on investment than Sensient Technologies. However, Waters is 1.28 times more volatile than Sensient Technologies. It trades about 0.06 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.02 per unit of risk. If you would invest 25,693 in Waters on September 4, 2024 and sell it today you would earn a total of 13,017 from holding Waters or generate 50.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waters vs. Sensient Technologies
Performance |
| Timeline |
| Waters |
| Sensient Technologies |
Waters and Sensient Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waters and Sensient Technologies
The main advantage of trading using opposite Waters and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters position performs unexpectedly, Sensient Technologies 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 Sensient Technologies will offset losses from the drop in Sensient Technologies' long position.| Waters vs. IDEXX Laboratories | Waters vs. IQVIA Holdings | Waters vs. Charles River Laboratories | Waters vs. Revvity |
| Sensient Technologies vs. Innospec | Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller | Sensient Technologies vs. Quaker Chemical |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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