Correlation Between Givaudan and Swiss Life

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

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

Diversification Opportunities for Givaudan and Swiss Life

0.27

Correlation Coefficient

Givaudan  Swiss Life

Modest diversification

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

Pair Corralation between Givaudan and Swiss Life

Assuming the 90 days trading horizon Givaudan SA is expected to under-perform the Swiss Life. In addition to that, Givaudan is 1.8 times more volatile than Swiss Life Holding. It trades about -0.01 of its total potential returns per unit of risk. Swiss Life Holding is currently generating about 0.28 per unit of volatility. If you would invest  69,960  in Swiss Life Holding on December 30, 2024 and sell it today you would earn a total of  10,780  from holding Swiss Life Holding or generate 15.41% 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.  Swiss Life Holding

Givaudan SA

Risk-Adjusted Performance

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 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.

Swiss Life Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Life Holding are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Swiss Life showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Givaudan and Swiss Life

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

The idea behind Givaudan SA and Swiss Life Holding 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.