Correlation Between Givaudan and Croda International
Can any of the company-specific risk be diversified away by investing in both Givaudan and Croda International 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 Croda International 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 Croda International PLC, you can compare the effects of market volatilities on Givaudan and Croda International 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 Croda International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Givaudan and Croda International.
Diversification Opportunities for Givaudan and Croda International
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Givaudan and Croda is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA ADR and Croda International PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Croda International PLC 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 Croda International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Croda International PLC has no effect on the direction of Givaudan i.e., Givaudan and Croda International go up and down completely randomly.
Pair Corralation between Givaudan and Croda International
Assuming the 90 days horizon Givaudan SA ADR is expected to generate 0.69 times more return on investment than Croda International. However, Givaudan SA ADR is 1.44 times less risky than Croda International. It trades about 0.03 of its potential returns per unit of risk. Croda International PLC is currently generating about -0.07 per unit of risk. If you would invest 8,136 in Givaudan SA ADR on August 25, 2024 and sell it today you would earn a total of 702.00 from holding Givaudan SA ADR or generate 8.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Givaudan SA ADR vs. Croda International PLC
Performance |
| Timeline |
| Givaudan SA ADR |
| Croda International PLC |
Givaudan and Croda International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Givaudan and Croda International
The main advantage of trading using opposite Givaudan and Croda International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Givaudan position performs unexpectedly, Croda International 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 Croda International will offset losses from the drop in Croda International's long position.| Givaudan vs. First Graphene | Givaudan vs. HUMANA INC | Givaudan vs. Aquagold International | Givaudan vs. Barloworld Ltd ADR |
| Croda International vs. First Graphene | Croda International vs. HUMANA INC | Croda International vs. Aquagold International | Croda International vs. Barloworld Ltd ADR |
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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