Correlation Between Compagnie Plastic and Givaudan

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Can any of the company-specific risk be diversified away by investing in both Compagnie Plastic 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 Compagnie Plastic and Givaudan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compagnie Plastic Omnium and Givaudan SA, you can compare the effects of market volatilities on Compagnie Plastic 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 Compagnie Plastic with a short position of Givaudan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Plastic and Givaudan.

Diversification Opportunities for Compagnie Plastic and Givaudan

-0.22
  Correlation Coefficient

Very good diversification

The 3 months correlation between Compagnie and Givaudan is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Plastic Omnium and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and Compagnie Plastic 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 Compagnie Plastic Omnium 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 Compagnie Plastic i.e., Compagnie Plastic and Givaudan go up and down completely randomly.

Pair Corralation between Compagnie Plastic and Givaudan

Assuming the 90 days trading horizon Compagnie Plastic Omnium is expected to under-perform the Givaudan. In addition to that, Compagnie Plastic is 1.92 times more volatile than Givaudan SA. It trades about -0.02 of its total potential returns per unit of risk. Givaudan SA is currently generating about 0.05 per unit of volatility. If you would invest  301,844  in Givaudan SA on September 28, 2024 and sell it today you would earn a total of  94,956  from holding Givaudan SA or generate 31.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.4%
ValuesDaily Returns

Compagnie Plastic Omnium  vs.  Givaudan SA

 Performance 
       Timeline  
Compagnie Plastic Omnium 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Plastic Omnium are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Compagnie Plastic may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Givaudan SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Givaudan SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Compagnie Plastic and Givaudan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Compagnie Plastic and Givaudan

The main advantage of trading using opposite Compagnie Plastic and Givaudan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Plastic 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.
The idea behind Compagnie Plastic Omnium and Givaudan SA 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.
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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