Correlation Between Garmin and Sensata Technologies

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

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

Diversification Opportunities for Garmin and Sensata Technologies

0.97

Correlation Coefficient

Garmin  Sensata Technologies

Almost no diversification

The 3 months correlation between Garmin and Sensata is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Garmin and Sensata Technologies Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensata Technologies and Garmin 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 Garmin are associated (or correlated) with Sensata Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensata Technologies has no effect on the direction of Garmin i.e., Garmin and Sensata Technologies go up and down completely randomly.

Pair Corralation between Garmin and Sensata Technologies

Given the investment horizon of 90 days Garmin is expected to generate 0.93 times more return on investment than Sensata Technologies. However, Garmin is 1.07 times less risky than Sensata Technologies. It trades about 0.14 of its potential returns per unit of risk. Sensata Technologies Holding is currently generating about 0.08 per unit of risk. If you would invest  12,419  in Garmin on March 11, 2024 and sell it today you would earn a total of  3,907  from holding Garmin or generate 31.46% return on investment over 90 days.

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

Garmin  vs.  Sensata Technologies Holding

Garmin

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Garmin are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Garmin may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Sensata Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sensata Technologies Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Sensata Technologies may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Garmin and Sensata Technologies

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

The idea behind Garmin and Sensata Technologies Holding 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.