Correlation Between Givaudan and International Flavors
Can any of the company-specific risk be diversified away by investing in both Givaudan and International Flavors 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 International Flavors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Givaudan SA and International Flavors Fragrances, you can compare the effects of market volatilities on Givaudan and International Flavors 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 International Flavors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Givaudan and International Flavors.
Diversification Opportunities for Givaudan and International Flavors
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Givaudan and International is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA and International Flavors Fragranc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Flavors 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 International Flavors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Flavors has no effect on the direction of Givaudan i.e., Givaudan and International Flavors go up and down completely randomly.
Pair Corralation between Givaudan and International Flavors
Assuming the 90 days horizon Givaudan is expected to generate 1.27 times less return on investment than International Flavors. But when comparing it to its historical volatility, Givaudan SA is 1.06 times less risky than International Flavors. It trades about 0.06 of its potential returns per unit of risk. International Flavors Fragrances is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 7,454 in International Flavors Fragrances on August 27, 2024 and sell it today you would earn a total of 1,627 from holding International Flavors Fragrances or generate 21.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.74% |
| Values | Daily Returns |
Givaudan SA vs. International Flavors Fragranc
Performance |
| Timeline |
| Givaudan SA |
| International Flavors |
Givaudan and International Flavors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Givaudan and International Flavors
The main advantage of trading using opposite Givaudan and International Flavors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Givaudan position performs unexpectedly, International Flavors 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 International Flavors will offset losses from the drop in International Flavors' long position.| Givaudan vs. First Graphene | Givaudan vs. HUMANA INC | Givaudan vs. Aquagold International | Givaudan vs. Barloworld Ltd ADR |
| International Flavors vs. Minerals Technologies | International Flavors vs. Oil Dri | International Flavors vs. H B Fuller | International Flavors vs. Northern Technologies |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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