Correlation Between Elementis PLC and Givaudan
Can any of the company-specific risk be diversified away by investing in both Elementis PLC 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 Elementis PLC and Givaudan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elementis PLC and Givaudan SA, you can compare the effects of market volatilities on Elementis PLC 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 Elementis PLC with a short position of Givaudan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elementis PLC and Givaudan.
Diversification Opportunities for Elementis PLC and Givaudan
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Elementis and Givaudan is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Elementis PLC and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and Elementis PLC 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 Elementis PLC 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 Elementis PLC i.e., Elementis PLC and Givaudan go up and down completely randomly.
Pair Corralation between Elementis PLC and Givaudan
Assuming the 90 days trading horizon Elementis PLC is expected to generate 3.87 times more return on investment than Givaudan. However, Elementis PLC is 3.87 times more volatile than Givaudan SA. It trades about 0.22 of its potential returns per unit of risk. Givaudan SA is currently generating about -0.03 per unit of risk. If you would invest 13,960 in Elementis PLC on October 25, 2024 and sell it today you would earn a total of 1,640 from holding Elementis PLC or generate 11.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Elementis PLC vs. Givaudan SA
Performance |
| Timeline |
| Elementis PLC |
| Givaudan SA |
Elementis PLC and Givaudan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elementis PLC and Givaudan
The main advantage of trading using opposite Elementis PLC and Givaudan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elementis PLC 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.| Elementis PLC vs. Flow Traders NV | Elementis PLC vs. Verizon Communications | Elementis PLC vs. Eastman Chemical Co | Elementis PLC vs. Cairo Communication SpA |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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