Correlation Between Clean Seas and Sensient Technologies

Can any of the company-specific risk be diversified away by investing in both Clean Seas 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 Clean Seas and Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Clean Seas Seafood and Sensient Technologies, you can compare the effects of market volatilities on Clean Seas 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 Clean Seas with a short position of Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Seas and Sensient Technologies.

Diversification Opportunities for Clean Seas and Sensient Technologies

0.66

Correlation Coefficient

Clean Seas  Sensient Technologies

Poor diversification

The 3 months correlation between Clean and Sensient is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Clean Seas Seafood and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and Clean Seas 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 Clean Seas Seafood 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 Clean Seas i.e., Clean Seas and Sensient Technologies go up and down completely randomly.

Pair Corralation between Clean Seas and Sensient Technologies

Assuming the 90 days horizon Clean Seas Seafood is expected to under-perform the Sensient Technologies. In addition to that, Clean Seas is 4.5 times more volatile than Sensient Technologies. It trades about -0.13 of its total potential returns per unit of risk. Sensient Technologies is currently generating about -0.08 per unit of volatility. If you would invest  7,927  in Sensient Technologies on September 27, 2024 and sell it today you would lose (584.00) from holding Sensient Technologies or give up 7.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Clean Seas Seafood  vs.  Sensient Technologies

Clean Seas Seafood

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Seas Seafood has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sensient Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sensient Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Clean Seas and Sensient Technologies

The main advantage of trading using opposite Clean Seas and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Seas 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.

The idea behind Clean Seas Seafood and Sensient Technologies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.