Correlation Between Givaudan and Swisscom

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

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

Diversification Opportunities for Givaudan and Swisscom

0.85

Correlation Coefficient

Givaudan  Swisscom

Very poor diversification

The 3 months correlation between Givaudan and Swisscom is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA and Swisscom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swisscom AG 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 Swisscom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swisscom AG has no effect on the direction of Givaudan i.e., Givaudan and Swisscom go up and down completely randomly.

Pair Corralation between Givaudan and Swisscom

Assuming the 90 days trading horizon Givaudan SA is expected to under-perform the Swisscom. In addition to that, Givaudan is 1.25 times more volatile than Swisscom AG. It trades about -0.17 of its total potential returns per unit of risk. Swisscom AG is currently generating about -0.16 per unit of volatility. If you would invest  55,150  in Swisscom AG on September 13, 2024 and sell it today you would lose (4,800) from holding Swisscom AG or give up 8.7% of portfolio value over 90 days.

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

Givaudan SA  vs.  Swisscom AG

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 abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Swisscom AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swisscom AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Givaudan and Swisscom

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

The idea behind Givaudan SA and Swisscom AG 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 Transaction History module to view history of all your transactions and understand their impact on performance.