Correlation Between Adriatic Metals and Givaudan

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

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

Diversification Opportunities for Adriatic Metals and Givaudan

-0.59

Correlation Coefficient

Adriatic Metals  Givaudan

Excellent diversification

The 3 months correlation between Adriatic and Givaudan is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Adriatic Metals and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and Adriatic Metals 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 Adriatic Metals are associated (or correlated) with Givaudan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Givaudan SA has no effect on the direction of Adriatic Metals i.e., Adriatic Metals and Givaudan go up and down completely randomly.

Pair Corralation between Adriatic Metals and Givaudan

Assuming the 90 days trading horizon Adriatic Metals is expected to generate 2.83 times more return on investment than Givaudan. However, Adriatic Metals is 2.83 times more volatile than Givaudan SA. It trades about 0.17 of its potential returns per unit of risk. Givaudan SA is currently generating about -0.15 per unit of risk. If you would invest  15,220  in Adriatic Metals on September 2, 2024 and sell it today you would earn a total of  5,930  from holding Adriatic Metals or generate 38.96% return on investment over 90 days.

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

Adriatic Metals  vs.  Givaudan SA

Adriatic Metals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Adriatic Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Adriatic Metals and Givaudan

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

The idea behind Adriatic Metals and Givaudan SA 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.