Correlation Between Sociedad Quimica and International Flavors

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

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

Diversification Opportunities for Sociedad Quimica and International Flavors

0.09

Correlation Coefficient

Sociedad Quimica  International Flavors

Significant diversification

The 3 months correlation between Sociedad and International is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Sociedad Quimica y and International Flavors Fragranc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Flavors and Sociedad Quimica 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 Sociedad Quimica y 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 Sociedad Quimica i.e., Sociedad Quimica and International Flavors go up and down completely randomly.

Pair Corralation between Sociedad Quimica and International Flavors

Considering the 90-day investment horizon Sociedad Quimica y is expected to generate 2.7 times more return on investment than International Flavors. However, Sociedad Quimica is 2.7 times more volatile than International Flavors Fragrances. It trades about 0.0 of its potential returns per unit of risk. International Flavors Fragrances is currently generating about -0.06 per unit of risk. If you would invest  3,914  in Sociedad Quimica y on November 19, 2024 and sell it today you would lose (51.00) from holding Sociedad Quimica y or give up 1.3% of portfolio value over 90 days.

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

Sociedad Quimica y  vs.  International Flavors Fragranc

Sociedad Quimica y

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sociedad Quimica y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Sociedad Quimica is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

International Flavors

Risk-Adjusted Performance

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 nearly stable technical and fundamental indicators, International Flavors is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sociedad Quimica and International Flavors

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

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.