Correlation Between Givaudan and Linde Plc

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

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

Diversification Opportunities for Givaudan and Linde Plc

0.39

Correlation Coefficient

Givaudan  Linde Plc

Weak diversification

The 3 months correlation between Givaudan and Linde is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA ADR and Linde plc Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde plc Ordinary 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 ADR are associated (or correlated) with Linde Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde plc Ordinary has no effect on the direction of Givaudan i.e., Givaudan and Linde Plc go up and down completely randomly.

Pair Corralation between Givaudan and Linde Plc

Assuming the 90 days horizon Givaudan SA ADR is expected to under-perform the Linde Plc. In addition to that, Givaudan is 1.88 times more volatile than Linde plc Ordinary. It trades about -0.02 of its total potential returns per unit of risk. Linde plc Ordinary is currently generating about 0.14 per unit of volatility. If you would invest  42,291  in Linde plc Ordinary on December 26, 2024 and sell it today you would earn a total of  3,454  from holding Linde plc Ordinary or generate 8.17% 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 ADR  vs.  Linde plc Ordinary

Givaudan SA ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Givaudan SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Givaudan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Linde plc Ordinary

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Linde plc Ordinary are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Linde Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Givaudan and Linde Plc

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

The idea behind Givaudan SA ADR and Linde plc Ordinary 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.