Correlation Between Sensient Technologies and Hibbett Sports

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

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

Diversification Opportunities for Sensient Technologies and Hibbett Sports

-0.11

Correlation Coefficient

Sensient Technologies  Hibbett Sports

Good diversification

The 3 months correlation between Sensient and Hibbett is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sensient Technologies and Hibbett Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hibbett Sports 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 Hibbett Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hibbett Sports has no effect on the direction of Sensient Technologies i.e., Sensient Technologies and Hibbett Sports go up and down completely randomly.

Pair Corralation between Sensient Technologies and Hibbett Sports

Considering the 90-day investment horizon Sensient Technologies is expected to generate 6.53 times less return on investment than Hibbett Sports. But when comparing it to its historical volatility, Sensient Technologies is 1.78 times less risky than Hibbett Sports. It trades about 0.03 of its potential returns per unit of risk. Hibbett Sports is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,867  in Hibbett Sports on June 9, 2024 and sell it today you would earn a total of  4,882  from holding Hibbett Sports or generate 126.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.31%
Values	Daily Returns

Sensient Technologies  vs.  Hibbett Sports

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.

Hibbett Sports

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Hibbett Sports has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Hibbett Sports is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sensient Technologies and Hibbett Sports

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

The idea behind Sensient Technologies and Hibbett Sports 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.