Correlation Between International Flavors and Trinseo SA

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

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

Diversification Opportunities for International Flavors and Trinseo SA

0.49

Correlation Coefficient

International Flavors  Trinseo SA

Very weak diversification

The 3 months correlation between International and Trinseo is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding International Flavors Fragranc and Trinseo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinseo SA and International Flavors 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 International Flavors Fragrances are associated (or correlated) with Trinseo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinseo SA has no effect on the direction of International Flavors i.e., International Flavors and Trinseo SA go up and down completely randomly.

Pair Corralation between International Flavors and Trinseo SA

Considering the 90-day investment horizon International Flavors Fragrances is expected to under-perform the Trinseo SA. But the stock apears to be less risky and, when comparing its historical volatility, International Flavors Fragrances is 20.22 times less risky than Trinseo SA. The stock trades about -0.42 of its potential returns per unit of risk. The Trinseo SA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  355.00  in Trinseo SA on September 23, 2024 and sell it today you would earn a total of  122.00  from holding Trinseo SA or generate 34.37% return on investment over 90 days.

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

International Flavors Fragranc  vs.  Trinseo SA

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.

Trinseo SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Trinseo SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Trinseo SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Flavors and Trinseo SA

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

The idea behind International Flavors Fragrances and Trinseo SA 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.