Correlation Between Givaudan and PPG Industries

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

Diversification Opportunities for Givaudan and PPG Industries

-0.2

Correlation Coefficient

Givaudan  PPG Industries

Good diversification

The 3 months correlation between Givaudan and PPG is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA ADR and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG Industries 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 PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of Givaudan i.e., Givaudan and PPG Industries go up and down completely randomly.

Pair Corralation between Givaudan and PPG Industries

Assuming the 90 days horizon Givaudan SA ADR is expected to generate 0.98 times more return on investment than PPG Industries. However, Givaudan SA ADR is 1.02 times less risky than PPG Industries. It trades about 0.01 of its potential returns per unit of risk. PPG Industries is currently generating about -0.08 per unit of risk. If you would invest  8,593  in Givaudan SA ADR on December 28, 2024 and sell it today you would lose (6.00) from holding Givaudan SA ADR or give up 0.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Givaudan SA ADR  vs.  PPG Industries

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.

PPG Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days PPG Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic 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 PPG Industries

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

The idea behind Givaudan SA ADR and PPG Industries 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..