Correlation Between Sika AG and Givaudan

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

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

Diversification Opportunities for Sika AG and Givaudan

0.69

Correlation Coefficient

Sika AG  Givaudan

Poor diversification

The 3 months correlation between Sika and Givaudan is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sika AG and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and Sika AG 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 Sika 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 Sika AG i.e., Sika AG and Givaudan go up and down completely randomly.

Pair Corralation between Sika AG and Givaudan

Assuming the 90 days horizon Sika AG is expected to under-perform the Givaudan. In addition to that, Sika AG is 1.25 times more volatile than Givaudan SA. It trades about -0.11 of its total potential returns per unit of risk. Givaudan SA is currently generating about -0.11 per unit of volatility. If you would invest  511,203  in Givaudan SA on September 12, 2024 and sell it today you would lose (75,650) from holding Givaudan SA or give up 14.8% of portfolio value over 90 days.

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

Sika AG  vs.  Givaudan SA

Sika AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sika AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic 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.

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. Despite unsteady performance in the last few months, the Stock's fundamental drivers 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 Sika AG and Givaudan

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

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.