Correlation Between American Express and Givaudan

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

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

Diversification Opportunities for American Express and Givaudan

-0.84

Correlation Coefficient

American Express  Givaudan

Pay attention - limited upside

The 3 months correlation between American and Givaudan is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and American Express 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 American Express 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 American Express i.e., American Express and Givaudan go up and down completely randomly.

Pair Corralation between American Express and Givaudan

Considering the 90-day investment horizon American Express is expected to generate 0.75 times more return on investment than Givaudan. However, American Express is 1.34 times less risky than Givaudan. It trades about 0.17 of its potential returns per unit of risk. Givaudan SA is currently generating about -0.14 per unit of risk. If you would invest  25,833  in American Express on September 13, 2024 and sell it today you would earn a total of  4,401  from holding American Express or generate 17.04% return on investment over 90 days.

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

American Express  vs.  Givaudan SA

American Express

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, American Express reported 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. Despite weak performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with American Express and Givaudan

The main advantage of trading using opposite American Express and Givaudan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express 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 American Express 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.