Correlation Between Capital Drilling and Givaudan
Can any of the company-specific risk be diversified away by investing in both Capital Drilling 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 Capital Drilling and Givaudan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Drilling and Givaudan SA, you can compare the effects of market volatilities on Capital Drilling 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 Capital Drilling with a short position of Givaudan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Drilling and Givaudan.
Diversification Opportunities for Capital Drilling and Givaudan
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capital and Givaudan is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Capital Drilling and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and Capital Drilling 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 Capital Drilling 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 Capital Drilling i.e., Capital Drilling and Givaudan go up and down completely randomly.
Pair Corralation between Capital Drilling and Givaudan
Assuming the 90 days trading horizon Capital Drilling is expected to generate 2.16 times more return on investment than Givaudan. However, Capital Drilling is 2.16 times more volatile than Givaudan SA. It trades about -0.04 of its potential returns per unit of risk. Givaudan SA is currently generating about -0.18 per unit of risk. If you would invest 8,400 in Capital Drilling on October 12, 2024 and sell it today you would lose (180.00) from holding Capital Drilling or give up 2.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Drilling vs. Givaudan SA
Performance |
| Timeline |
| Capital Drilling |
| Givaudan SA |
Capital Drilling and Givaudan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Drilling and Givaudan
The main advantage of trading using opposite Capital Drilling and Givaudan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Drilling 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.| Capital Drilling vs. G5 Entertainment AB | Capital Drilling vs. Heavitree Brewery | Capital Drilling vs. Grand Vision Media | Capital Drilling vs. National Beverage Corp |
| Givaudan vs. Compal Electronics GDR | Givaudan vs. STMicroelectronics NV | Givaudan vs. Porvair plc | Givaudan vs. Capital Drilling |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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