Correlation Between Plexus Corp and Sensient Technologies

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

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

Diversification Opportunities for Plexus Corp and Sensient Technologies

0.0

Correlation Coefficient

Plexus Corp  Sensient Technologies

Pay attention - limited upside

The 3 months correlation between Plexus and Sensient is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Plexus Corp and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and Plexus Corp 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 Plexus Corp 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 Plexus Corp i.e., Plexus Corp and Sensient Technologies go up and down completely randomly.

Pair Corralation between Plexus Corp and Sensient Technologies

Given the investment horizon of 90 days Plexus Corp is expected to generate 1.19 times more return on investment than Sensient Technologies. However, Plexus Corp is 1.19 times more volatile than Sensient Technologies. It trades about 0.05 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.01 per unit of risk. If you would invest  11,005  in Plexus Corp on September 29, 2024 and sell it today you would earn a total of  4,774  from holding Plexus Corp or generate 43.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Plexus Corp  vs.  Sensient Technologies

Plexus Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plexus Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Plexus Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 Plexus Corp and Sensient Technologies

The main advantage of trading using opposite Plexus Corp and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plexus Corp 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 Plexus Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.