Correlation Between Central Asia and Givaudan

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

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

Diversification Opportunities for Central Asia and Givaudan

-0.16

Correlation Coefficient

Central Asia  Givaudan

Good diversification

The 3 months correlation between Central and Givaudan is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and Central Asia 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 Central Asia 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 Central Asia i.e., Central Asia and Givaudan go up and down completely randomly.

Pair Corralation between Central Asia and Givaudan

Assuming the 90 days trading horizon Central Asia Metals is expected to under-perform the Givaudan. In addition to that, Central Asia is 1.4 times more volatile than Givaudan SA. It trades about -0.01 of its total potential returns per unit of risk. Givaudan SA is currently generating about 0.07 per unit of volatility. If you would invest  383,150  in Givaudan SA on November 28, 2024 and sell it today you would earn a total of  20,400  from holding Givaudan SA or generate 5.32% return on investment over 90 days.

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

Central Asia Metals  vs.  Givaudan SA

Central Asia Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Central Asia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Givaudan SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Givaudan SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Givaudan is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Central Asia and Givaudan

The main advantage of trading using opposite Central Asia and Givaudan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Asia 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 Central Asia 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 Commodity Directory module to find actively traded commodities issued by global exchanges.