Correlation Between Hudson Technologies and Sensient Technologies

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

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

Diversification Opportunities for Hudson Technologies and Sensient Technologies

0.86

Correlation Coefficient

Hudson Technologies  Sensient Technologies

Very poor diversification

The 3 months correlation between Hudson and Sensient is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Technologies and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies and Hudson 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 Hudson Technologies are associated (or correlated) with Sensient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensient Technologies has no effect on the direction of Hudson Technologies i.e., Hudson Technologies and Sensient Technologies go up and down completely randomly.

Pair Corralation between Hudson Technologies and Sensient Technologies

Given the investment horizon of 90 days Hudson Technologies is expected to generate 1.21 times less return on investment than Sensient Technologies. In addition to that, Hudson Technologies is 1.49 times more volatile than Sensient Technologies. It trades about 0.13 of its total potential returns per unit of risk. Sensient Technologies is currently generating about 0.23 per unit of volatility. If you would invest  6,842  in Sensient Technologies on March 1, 2025 and sell it today you would earn a total of  2,603  from holding Sensient Technologies or generate 38.04% return on investment over 90 days.

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

Hudson Technologies  vs.  Sensient Technologies

Hudson Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hudson Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Hudson Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Sensient Technologies

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sensient Technologies are ranked lower than 17 (%) 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.

Pair Trading with Hudson Technologies and Sensient Technologies

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

The idea behind Hudson Technologies and Sensient Technologies 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.