Correlation Between Givaudan and Mitsui Chemicals

Can any of the company-specific risk be diversified away by investing in both Givaudan and Mitsui Chemicals 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 Mitsui Chemicals 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 Mitsui Chemicals ADR, you can compare the effects of market volatilities on Givaudan and Mitsui Chemicals 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 Mitsui Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Givaudan and Mitsui Chemicals.

Diversification Opportunities for Givaudan and Mitsui Chemicals

0.81

Correlation Coefficient

Givaudan  Mitsui Chemicals

Very poor diversification

The 3 months correlation between Givaudan and Mitsui is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA ADR and Mitsui Chemicals ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals ADR 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 Mitsui Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Chemicals ADR has no effect on the direction of Givaudan i.e., Givaudan and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Givaudan and Mitsui Chemicals

Assuming the 90 days horizon Givaudan SA ADR is expected to generate 0.19 times more return on investment than Mitsui Chemicals. However, Givaudan SA ADR is 5.15 times less risky than Mitsui Chemicals. It trades about 0.05 of its potential returns per unit of risk. Mitsui Chemicals ADR is currently generating about -0.04 per unit of risk. If you would invest  8,787  in Givaudan SA ADR on September 28, 2024 and sell it today you would earn a total of  97.00  from holding Givaudan SA ADR or generate 1.1% return on investment over 90 days.

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

Givaudan SA ADR  vs.  Mitsui Chemicals ADR

Givaudan SA ADR

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Mitsui Chemicals ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Chemicals ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Givaudan and Mitsui Chemicals

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

The idea behind Givaudan SA ADR and Mitsui Chemicals ADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.