Correlation Between Sensient Technologies and Marfrig Global

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

By analyzing existing cross correlation between Sensient Technologies and Marfrig Global Foods, you can compare the effects of market volatilities on Sensient Technologies and Marfrig Global 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 Marfrig Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensient Technologies and Marfrig Global.

Diversification Opportunities for Sensient Technologies and Marfrig Global

0.09

Correlation Coefficient

Sensient Technologies  Marfrig Global

Significant diversification

The 3 months correlation between Sensient and Marfrig is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Marfrig Global Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marfrig Global Foods 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 Marfrig Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marfrig Global Foods has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Marfrig Global go up and down completely randomly.

Pair Corralation between Sensient Technologies and Marfrig Global

Considering the 90-day investment horizon Sensient Technologies is expected to under-perform the Marfrig Global. But the stock apears to be less risky and, when comparing its historical volatility, Sensient Technologies is 2.47 times less risky than Marfrig Global. The stock trades about -0.06 of its potential returns per unit of risk. The Marfrig Global Foods is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  248.00  in Marfrig Global Foods on September 21, 2024 and sell it today you would earn a total of  3.00  from holding Marfrig Global Foods or generate 1.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sensient Technologies  vs.  Marfrig Global Foods

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 comparatively stable basic indicators, Sensient Technologies is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Marfrig Global Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Marfrig Global is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sensient Technologies and Marfrig Global

The main advantage of trading using opposite Sensient Technologies and Marfrig Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensient Technologies position performs unexpectedly, Marfrig Global 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 Marfrig Global will offset losses from the drop in Marfrig Global's long position.

The idea behind Sensient Technologies and Marfrig Global Foods 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.