Correlation Between Givaudan and Albemarle Corp

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

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

Diversification Opportunities for Givaudan and Albemarle Corp

0.47

Correlation Coefficient

Givaudan  Albemarle Corp

Very weak diversification

The 3 months correlation between Givaudan and Albemarle is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA and Albemarle Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle Corp 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 Albemarle Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle Corp has no effect on the direction of Givaudan i.e., Givaudan and Albemarle Corp go up and down completely randomly.

Pair Corralation between Givaudan and Albemarle Corp

Assuming the 90 days horizon Givaudan SA is expected to generate 1.4 times more return on investment than Albemarle Corp. However, Givaudan is 1.4 times more volatile than Albemarle Corp. It trades about -0.05 of its potential returns per unit of risk. Albemarle Corp is currently generating about -0.18 per unit of risk. If you would invest  438,448  in Givaudan SA on December 2, 2024 and sell it today you would lose (18,112) from holding Givaudan SA or give up 4.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Givaudan SA  vs.  Albemarle Corp

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. Despite nearly stable fundamental drivers, Givaudan is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Albemarle Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Albemarle Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Givaudan and Albemarle Corp

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

The idea behind Givaudan SA and Albemarle Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.