Correlation Between Givaudan and Sika AG
Can any of the company-specific risk be diversified away by investing in both Givaudan and Sika AG 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 Sika AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Givaudan SA and Sika AG ADR, you can compare the effects of market volatilities on Givaudan and Sika AG 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 Sika AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Givaudan and Sika AG.
Diversification Opportunities for Givaudan and Sika AG
Very weak diversification
The 3 months correlation between Givaudan and Sika is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA and Sika AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sika AG ADR 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 Sika AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sika AG ADR has no effect on the direction of Givaudan i.e., Givaudan and Sika AG go up and down completely randomly.
Pair Corralation between Givaudan and Sika AG
Assuming the 90 days horizon Givaudan SA is expected to generate 1.23 times more return on investment than Sika AG. However, Givaudan is 1.23 times more volatile than Sika AG ADR. It trades about -0.21 of its potential returns per unit of risk. Sika AG ADR is currently generating about -0.26 per unit of risk. If you would invest 521,100 in Givaudan SA on August 24, 2024 and sell it today you would lose (42,300) from holding Givaudan SA or give up 8.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Givaudan SA vs. Sika AG ADR
Performance |
| Timeline |
| Givaudan SA |
| Sika AG ADR |
Givaudan and Sika AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Givaudan and Sika AG
The main advantage of trading using opposite Givaudan and Sika AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Givaudan position performs unexpectedly, Sika AG 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 Sika AG will offset losses from the drop in Sika AG's long position.| Givaudan vs. Sika AG ADR | Givaudan vs. Givaudan SA ADR | Givaudan vs. Symrise Ag PK | Givaudan vs. Novozymes AS |
| Sika AG vs. Sherwin Williams Co | Sika AG vs. Air Liquide SA | Sika AG vs. LAir Liquide SA | Sika AG vs. Air Products and |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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