Correlation Between Swatch Group and Givaudan

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

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

Diversification Opportunities for Swatch Group and Givaudan

0.14

Correlation Coefficient

Swatch Group  Givaudan

Average diversification

The 3 months correlation between Swatch and Givaudan is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Swatch Group AG and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and Swatch Group 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 Swatch Group 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 Swatch Group i.e., Swatch Group and Givaudan go up and down completely randomly.

Pair Corralation between Swatch Group and Givaudan

Assuming the 90 days trading horizon Swatch Group AG is expected to generate 2.36 times more return on investment than Givaudan. However, Swatch Group is 2.36 times more volatile than Givaudan SA. It trades about -0.02 of its potential returns per unit of risk. Givaudan SA is currently generating about -0.15 per unit of risk. If you would invest  16,730  in Swatch Group AG on September 5, 2024 and sell it today you would lose (935.00) from holding Swatch Group AG or give up 5.59% of portfolio value over 90 days.

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

Swatch Group AG  vs.  Givaudan SA

Swatch Group AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swatch Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Swatch Group is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the 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 Swatch Group and Givaudan

The main advantage of trading using opposite Swatch Group and Givaudan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swatch Group 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 Swatch Group 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 Global Correlations module to find global opportunities by holding instruments from different markets.