Correlation Between Diversified Energy and Givaudan

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

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

Diversification Opportunities for Diversified Energy and Givaudan

-0.2

Correlation Coefficient

Diversified Energy  Givaudan

Good diversification

The 3 months correlation between Diversified and Givaudan is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Energy and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and Diversified Energy 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 Diversified Energy 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 Diversified Energy i.e., Diversified Energy and Givaudan go up and down completely randomly.

Pair Corralation between Diversified Energy and Givaudan

Assuming the 90 days trading horizon Diversified Energy is expected to under-perform the Givaudan. In addition to that, Diversified Energy is 2.11 times more volatile than Givaudan SA. It trades about -0.06 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	98.39%
Values	Daily Returns

Diversified Energy  vs.  Givaudan SA

Diversified Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diversified Energy 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.

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 Diversified Energy and Givaudan

The main advantage of trading using opposite Diversified Energy and Givaudan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diversified Energy 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 Diversified Energy 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.