Correlation Between Givaudan and Compagnie Financire

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

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

Diversification Opportunities for Givaudan and Compagnie Financire

0.27

Correlation Coefficient

Givaudan  Compagnie Financire

Modest diversification

The 3 months correlation between Givaudan and Compagnie is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA and Compagnie Financire Richemont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Financire 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 Compagnie Financire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Financire has no effect on the direction of Givaudan i.e., Givaudan and Compagnie Financire go up and down completely randomly.

Pair Corralation between Givaudan and Compagnie Financire

Assuming the 90 days trading horizon Givaudan SA is expected to generate 0.68 times more return on investment than Compagnie Financire. However, Givaudan SA is 1.47 times less risky than Compagnie Financire. It trades about 0.06 of its potential returns per unit of risk. Compagnie Financire Richemont is currently generating about 0.02 per unit of risk. If you would invest  290,527  in Givaudan SA on September 28, 2024 and sell it today you would earn a total of  104,373  from holding Givaudan SA or generate 35.93% return on investment over 90 days.

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

Givaudan SA  vs.  Compagnie Financire Richemont

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Compagnie Financire

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Compagnie Financire is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Givaudan and Compagnie Financire

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

The idea behind Givaudan SA and Compagnie Financire Richemont 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.