Correlation Between Givaudan and Applied Graphene
Can any of the company-specific risk be diversified away by investing in both Givaudan and Applied Graphene 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 Applied Graphene into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Givaudan SA ADR and Applied Graphene Materials, you can compare the effects of market volatilities on Givaudan and Applied Graphene 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 Applied Graphene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Givaudan and Applied Graphene.
Diversification Opportunities for Givaudan and Applied Graphene
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Givaudan and Applied is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA ADR and Applied Graphene Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Graphene Mat 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 ADR are associated (or correlated) with Applied Graphene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Graphene Mat has no effect on the direction of Givaudan i.e., Givaudan and Applied Graphene go up and down completely randomly.
Pair Corralation between Givaudan and Applied Graphene
Assuming the 90 days horizon Givaudan is expected to generate 95.95 times less return on investment than Applied Graphene. But when comparing it to its historical volatility, Givaudan SA ADR is 76.27 times less risky than Applied Graphene. It trades about 0.07 of its potential returns per unit of risk. Applied Graphene Materials is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5.00 in Applied Graphene Materials on August 31, 2024 and sell it today you would lose (4.99) from holding Applied Graphene Materials or give up 99.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 93.58% |
| Values | Daily Returns |
Givaudan SA ADR vs. Applied Graphene Materials
Performance |
| Timeline |
| Givaudan SA ADR |
| Applied Graphene Mat |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Givaudan and Applied Graphene Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Givaudan and Applied Graphene
The main advantage of trading using opposite Givaudan and Applied Graphene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Givaudan position performs unexpectedly, Applied Graphene 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 Applied Graphene will offset losses from the drop in Applied Graphene's long position.The idea behind Givaudan SA ADR and Applied Graphene Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Applied Graphene vs. First Graphene | Applied Graphene vs. Haydale Graphene Industries | Applied Graphene vs. G6 Materials Corp | Applied Graphene vs. Versarien plc |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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