Correlation Between Swisscom and Givaudan

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

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

Diversification Opportunities for Swisscom and Givaudan

0.84

Correlation Coefficient

Swisscom  Givaudan

Very poor diversification

The 3 months correlation between Swisscom and Givaudan is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Swisscom AG and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and Swisscom 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 Swisscom AG are associated (or correlated) with Givaudan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Givaudan SA has no effect on the direction of Swisscom i.e., Swisscom and Givaudan go up and down completely randomly.

Pair Corralation between Swisscom and Givaudan

Assuming the 90 days trading horizon Swisscom AG is expected to generate 0.81 times more return on investment than Givaudan. However, Swisscom AG is 1.23 times less risky than Givaudan. It trades about -0.14 of its potential returns per unit of risk. Givaudan SA is currently generating about -0.15 per unit of risk. If you would invest  55,000  in Swisscom AG on September 5, 2024 and sell it today you would lose (4,150) from holding Swisscom AG or give up 7.55% of portfolio value over 90 days.

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

Swisscom AG  vs.  Givaudan SA

Swisscom AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swisscom AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Givaudan SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Givaudan SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Swisscom and Givaudan

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

The idea behind Swisscom AG and Givaudan 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.