Correlation Between SentinelOne and ESS Tech

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

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

Diversification Opportunities for SentinelOne and ESS Tech

0.72

Correlation Coefficient

SentinelOne  ESS Tech

Poor diversification

The 3 months correlation between SentinelOne and ESS is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding SentinelOne and ESS Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESS Tech and SentinelOne 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 SentinelOne are associated (or correlated) with ESS Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESS Tech has no effect on the direction of SentinelOne i.e., SentinelOne and ESS Tech go up and down completely randomly.

Pair Corralation between SentinelOne and ESS Tech

Taking into account the 90-day investment horizon SentinelOne is expected to generate 36.43 times less return on investment than ESS Tech. But when comparing it to its historical volatility, SentinelOne is 6.75 times less risky than ESS Tech. It trades about 0.01 of its potential returns per unit of risk. ESS Tech is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  218.00  in ESS Tech on May 2, 2025 and sell it today you would lose (30.00) from holding ESS Tech or give up 13.76% of portfolio value over 90 days.

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

SentinelOne  vs.  ESS Tech

SentinelOne

Risk-Adjusted Performance

Weak

Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SentinelOne is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

ESS Tech

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ESS Tech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, ESS Tech demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SentinelOne and ESS Tech

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

The idea behind SentinelOne and ESS Tech 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.