Correlation Between Givaudan and Neometals
Can any of the company-specific risk be diversified away by investing in both Givaudan and Neometals 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 Neometals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Givaudan SA and Neometals, you can compare the effects of market volatilities on Givaudan and Neometals 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 Neometals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Givaudan and Neometals.
Diversification Opportunities for Givaudan and Neometals
Good diversification
The 3 months correlation between Givaudan and Neometals is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA and Neometals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neometals 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 Neometals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neometals has no effect on the direction of Givaudan i.e., Givaudan and Neometals go up and down completely randomly.
Pair Corralation between Givaudan and Neometals
Assuming the 90 days trading horizon Givaudan SA is expected to generate 0.32 times more return on investment than Neometals. However, Givaudan SA is 3.12 times less risky than Neometals. It trades about 0.09 of its potential returns per unit of risk. Neometals is currently generating about 0.02 per unit of risk. If you would invest 392,000 in Givaudan SA on November 4, 2024 and sell it today you would earn a total of 10,550 from holding Givaudan SA or generate 2.69% 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. Neometals
Performance |
| Timeline |
| Givaudan SA |
| Neometals |
Givaudan and Neometals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Givaudan and Neometals
The main advantage of trading using opposite Givaudan and Neometals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Givaudan position performs unexpectedly, Neometals 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 Neometals will offset losses from the drop in Neometals' long position.| Givaudan vs. Orient Telecoms | Givaudan vs. Clean Power Hydrogen | Givaudan vs. Telecom Italia SpA | Givaudan vs. Abingdon Health Plc |
| Neometals vs. Catena Media PLC | Neometals vs. JD Sports Fashion | Neometals vs. China Pacific Insurance | Neometals vs. Ion Beam Applications |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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