Correlation Between Givaudan and Alien Metals

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

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

Diversification Opportunities for Givaudan and Alien Metals

0.26

Correlation Coefficient

Givaudan  Alien Metals

Modest diversification

The 3 months correlation between Givaudan and Alien is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA and Alien Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alien Metals 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 Alien Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alien Metals has no effect on the direction of Givaudan i.e., Givaudan and Alien Metals go up and down completely randomly.

Pair Corralation between Givaudan and Alien Metals

Assuming the 90 days trading horizon Givaudan SA is expected to generate 0.54 times more return on investment than Alien Metals. However, Givaudan SA is 1.84 times less risky than Alien Metals. It trades about -0.01 of its potential returns per unit of risk. Alien Metals is currently generating about -0.14 per unit of risk. If you would invest  390,080  in Givaudan SA on October 10, 2024 and sell it today you would lose (1,680) from holding Givaudan SA or give up 0.43% of portfolio value over 90 days.

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

Givaudan SA  vs.  Alien Metals

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Alien Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alien Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Givaudan and Alien Metals

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

The idea behind Givaudan SA and Alien Metals 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.