Correlation Between Givaudan and European Metals
Can any of the company-specific risk be diversified away by investing in both Givaudan and European Metals 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 Givaudan and European Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Givaudan SA and European Metals Holdings, you can compare the effects of market volatilities on Givaudan and European Metals 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 Givaudan with a short position of European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Givaudan and European Metals.
Diversification Opportunities for Givaudan and European Metals
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Givaudan and European is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings and Givaudan 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 Givaudan SA are associated (or correlated) with European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of Givaudan i.e., Givaudan and European Metals go up and down completely randomly.
Pair Corralation between Givaudan and European Metals
Assuming the 90 days trading horizon Givaudan SA is expected to generate 0.27 times more return on investment than European Metals. However, Givaudan SA is 3.72 times less risky than European Metals. It trades about 0.04 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.04 per unit of risk. If you would invest 367,338 in Givaudan SA on November 3, 2024 and sell it today you would earn a total of 35,212 from holding Givaudan SA or generate 9.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Givaudan SA vs. European Metals Holdings
Performance |
| Timeline |
| Givaudan SA |
| European Metals Holdings |
Givaudan and European Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Givaudan and European Metals
The main advantage of trading using opposite Givaudan and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Givaudan position performs unexpectedly, European Metals 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 European Metals will offset losses from the drop in European Metals' long position.| Givaudan vs. Orient Telecoms | Givaudan vs. Clean Power Hydrogen | Givaudan vs. Telecom Italia SpA | Givaudan vs. Abingdon Health Plc |
| European Metals vs. Zoom Video Communications | European Metals vs. CNH Industrial NV | European Metals vs. GreenX Metals | European Metals vs. McEwen Mining |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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