Correlation Between Sensata Technologies and Badger Meter

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

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

Diversification Opportunities for Sensata Technologies and Badger Meter

0.81

Correlation Coefficient

Sensata Technologies  Badger Meter

Very poor diversification

The 3 months correlation between Sensata and Badger is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sensata Technologies Holding and Badger Meter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Badger Meter and Sensata 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 Sensata Technologies Holding are associated (or correlated) with Badger Meter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Badger Meter has no effect on the direction of Sensata Technologies i.e., Sensata Technologies and Badger Meter go up and down completely randomly.

Pair Corralation between Sensata Technologies and Badger Meter

Allowing for the 90-day total investment horizon Sensata Technologies is expected to generate 1.45 times less return on investment than Badger Meter. In addition to that, Sensata Technologies is 1.07 times more volatile than Badger Meter. It trades about 0.04 of its total potential returns per unit of risk. Badger Meter is currently generating about 0.06 per unit of volatility. If you would invest  19,046  in Badger Meter on March 5, 2024 and sell it today you would earn a total of  250.00  from holding Badger Meter or generate 1.31% return on investment over 90 days.

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

Sensata Technologies Holding  vs.  Badger Meter

Sensata Technologies

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sensata Technologies Holding are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Sensata Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Badger Meter

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Badger Meter are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady primary indicators, Badger Meter demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sensata Technologies and Badger Meter

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

The idea behind Sensata Technologies Holding and Badger Meter 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.