Correlation Between Givaudan and International Flavors

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

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

Diversification Opportunities for Givaudan and International Flavors

0.78

Correlation Coefficient

Givaudan  International Flavors

Poor diversification

The 3 months correlation between Givaudan and International is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA and International Flavors Fragranc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Flavors 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 International Flavors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Flavors has no effect on the direction of Givaudan i.e., Givaudan and International Flavors go up and down completely randomly.

Pair Corralation between Givaudan and International Flavors

Assuming the 90 days horizon Givaudan SA is expected to under-perform the International Flavors. In addition to that, Givaudan is 1.15 times more volatile than International Flavors Fragrances. It trades about -0.11 of its total potential returns per unit of risk. International Flavors Fragrances is currently generating about -0.1 per unit of volatility. If you would invest  10,227  in International Flavors Fragrances on September 5, 2024 and sell it today you would lose (1,211) from holding International Flavors Fragrances or give up 11.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Givaudan SA  vs.  International Flavors Fragranc

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. Despite abnormal performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

International Flavors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Flavors Fragrances has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Givaudan and International Flavors

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

The idea behind Givaudan SA and International Flavors Fragrances 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.