Correlation Between Givaudan and Ironveld Plc

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

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

Diversification Opportunities for Givaudan and Ironveld Plc

0.18

Correlation Coefficient

Givaudan  Ironveld Plc

Average diversification

The 3 months correlation between Givaudan and Ironveld is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA and Ironveld Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironveld Plc and Givaudan 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 Givaudan SA are associated (or correlated) with Ironveld Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ironveld Plc has no effect on the direction of Givaudan i.e., Givaudan and Ironveld Plc go up and down completely randomly.

Pair Corralation between Givaudan and Ironveld Plc

Assuming the 90 days trading horizon Givaudan SA is expected to generate 0.44 times more return on investment than Ironveld Plc. However, Givaudan SA is 2.25 times less risky than Ironveld Plc. It trades about -0.15 of its potential returns per unit of risk. Ironveld Plc is currently generating about -0.14 per unit of risk. If you would invest  436,850  in Givaudan SA on September 3, 2024 and sell it today you would lose (49,200) from holding Givaudan SA or give up 11.26% of portfolio value over 90 days.

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

Givaudan SA  vs.  Ironveld Plc

Givaudan SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Givaudan SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Ironveld Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ironveld Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Givaudan and Ironveld Plc

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

The idea behind Givaudan SA and Ironveld Plc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.