Correlation Between Sensient Technologies and Sasol

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

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

Diversification Opportunities for Sensient Technologies and Sasol

-0.32

Correlation Coefficient

Sensient Technologies  Sasol

Very good diversification

The 3 months correlation between Sensient and Sasol is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Sasol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasol 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 Sasol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sasol has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Sasol go up and down completely randomly.

Pair Corralation between Sensient Technologies and Sasol

Considering the 90-day investment horizon Sensient Technologies is expected to generate 0.33 times more return on investment than Sasol. However, Sensient Technologies is 3.0 times less risky than Sasol. It trades about -0.04 of its potential returns per unit of risk. Sasol is currently generating about -0.27 per unit of risk. If you would invest  7,602  in Sensient Technologies on August 7, 2024 and sell it today you would lose (68.00) from holding Sensient Technologies or give up 0.89% of portfolio value over 90 days.

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

Sensient Technologies  vs.  Sasol

Sensient Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sensient Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Sensient Technologies may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Sasol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sasol has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Sensient Technologies and Sasol

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

The idea behind Sensient Technologies and Sasol 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .