Correlation Between Brenntag and Givaudan
Can any of the company-specific risk be diversified away by investing in both Brenntag 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 Brenntag and Givaudan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brenntag AG ADR and Givaudan SA ADR, you can compare the effects of market volatilities on Brenntag 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 Brenntag with a short position of Givaudan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brenntag and Givaudan.
Diversification Opportunities for Brenntag and Givaudan
Very poor diversification
The 3 months correlation between Brenntag and Givaudan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Brenntag AG ADR and Givaudan SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA ADR and Brenntag 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 Brenntag AG ADR 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 ADR has no effect on the direction of Brenntag i.e., Brenntag and Givaudan go up and down completely randomly.
Pair Corralation between Brenntag and Givaudan
Assuming the 90 days horizon Brenntag AG ADR is expected to generate 2.12 times more return on investment than Givaudan. However, Brenntag is 2.12 times more volatile than Givaudan SA ADR. It trades about -0.03 of its potential returns per unit of risk. Givaudan SA ADR is currently generating about -0.33 per unit of risk. If you would invest 1,320 in Brenntag AG ADR on August 28, 2024 and sell it today you would lose (37.00) from holding Brenntag AG ADR or give up 2.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brenntag AG ADR vs. Givaudan SA ADR
Performance |
| Timeline |
| Brenntag AG ADR |
| Givaudan SA ADR |
Brenntag and Givaudan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brenntag and Givaudan
The main advantage of trading using opposite Brenntag and Givaudan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brenntag 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.| Brenntag vs. First Graphene | Brenntag vs. HUMANA INC | Brenntag vs. Aquagold International | Brenntag vs. Barloworld Ltd ADR |
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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