Correlation Between Hawkins and International Flavors

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

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

Diversification Opportunities for Hawkins and International Flavors

-0.28

Correlation Coefficient

Hawkins  International Flavors

Very good diversification

The 3 months correlation between Hawkins and International is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Hawkins and International Flavors Fragranc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Flavors and Hawkins 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 Hawkins 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 Hawkins i.e., Hawkins and International Flavors go up and down completely randomly.

Pair Corralation between Hawkins and International Flavors

Given the investment horizon of 90 days Hawkins is expected to generate 1.57 times more return on investment than International Flavors. However, Hawkins is 1.57 times more volatile than International Flavors Fragrances. It trades about 0.11 of its potential returns per unit of risk. International Flavors Fragrances is currently generating about 0.04 per unit of risk. If you would invest  6,225  in Hawkins on September 23, 2024 and sell it today you would earn a total of  6,173  from holding Hawkins or generate 99.16% return on investment over 90 days.

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

Hawkins  vs.  International Flavors Fragranc

Hawkins

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hawkins are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking signals, Hawkins is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Stock's technical and fundamental indicators 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.

Pair Trading with Hawkins and International Flavors

The main advantage of trading using opposite Hawkins and International Flavors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawkins 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 Hawkins 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.