Correlation Between Givaudan and SGS SA

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

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

Diversification Opportunities for Givaudan and SGS SA

0.18

Correlation Coefficient

Givaudan  SGS SA

Average diversification

The 3 months correlation between Givaudan and SGS is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA 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 SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Givaudan i.e., Givaudan and SGS SA go up and down completely randomly.

Pair Corralation between Givaudan and SGS SA

Assuming the 90 days trading horizon Givaudan SA is expected to generate 0.92 times more return on investment than SGS SA. However, Givaudan SA is 1.08 times less risky than SGS SA. It trades about 0.07 of its potential returns per unit of risk. SGS SA is currently generating about 0.04 per unit of risk. If you would invest  268,999  in Givaudan SA on December 2, 2024 and sell it today you would earn a total of  136,801  from holding Givaudan SA or generate 50.86% return on investment over 90 days.

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

Givaudan SA  vs.  SGS SA

Givaudan SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Givaudan SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Givaudan is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SGS SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SGS SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, SGS SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Givaudan and SGS SA

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

The idea behind Givaudan SA and SGS 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .