Correlation Between Sensient Technologies and Insteel Industries

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Can any of the company-specific risk be diversified away by investing in both Sensient Technologies and Insteel Industries 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 Insteel Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sensient Technologies and Insteel Industries, you can compare the effects of market volatilities on Sensient Technologies and Insteel Industries 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 Insteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensient Technologies and Insteel Industries.

Diversification Opportunities for Sensient Technologies and Insteel Industries

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Sensient and Insteel is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries 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 Insteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insteel Industries has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Insteel Industries go up and down completely randomly.

Pair Corralation between Sensient Technologies and Insteel Industries

Considering the 90-day investment horizon Sensient Technologies is expected to generate 0.7 times more return on investment than Insteel Industries. However, Sensient Technologies is 1.42 times less risky than Insteel Industries. It trades about 0.25 of its potential returns per unit of risk. Insteel Industries is currently generating about 0.02 per unit of risk. If you would invest  9,397  in Sensient Technologies on May 6, 2025 and sell it today you would earn a total of  1,943  from holding Sensient Technologies or generate 20.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Sensient Technologies  vs.  Insteel Industries

 Performance 
       Timeline  
Sensient Technologies 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Sensient Technologies are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Sensient Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.
Insteel Industries 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Insteel Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Insteel Industries is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Sensient Technologies and Insteel Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sensient Technologies and Insteel Industries

The main advantage of trading using opposite Sensient Technologies and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensient Technologies position performs unexpectedly, Insteel Industries 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 Insteel Industries will offset losses from the drop in Insteel Industries' long position.
The idea behind Sensient Technologies and Insteel Industries 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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