Correlation Between Givaudan and Premier African

Can any of the company-specific risk be diversified away by investing in both Givaudan and Premier African 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 Premier African into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Givaudan SA and Premier African Minerals, you can compare the effects of market volatilities on Givaudan and Premier African 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 Premier African. Check out your portfolio center. Please also check ongoing floating volatility patterns of Givaudan and Premier African.

Diversification Opportunities for Givaudan and Premier African

0.52

Correlation Coefficient

Givaudan  Premier African

Very weak diversification

The 3 months correlation between Givaudan and Premier is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA and Premier African Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier African Minerals 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 Premier African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier African Minerals has no effect on the direction of Givaudan i.e., Givaudan and Premier African go up and down completely randomly.

Pair Corralation between Givaudan and Premier African

Assuming the 90 days trading horizon Givaudan SA is expected to under-perform the Premier African. But the stock apears to be less risky and, when comparing its historical volatility, Givaudan SA is 10.1 times less risky than Premier African. The stock trades about -0.15 of its potential returns per unit of risk. The Premier African Minerals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6.25  in Premier African Minerals on September 3, 2024 and sell it today you would lose (0.75) from holding Premier African Minerals or give up 12.0% 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.  Premier African Minerals

Givaudan SA

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Premier African Minerals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Premier African Minerals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Premier African unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Givaudan and Premier African

The main advantage of trading using opposite Givaudan and Premier African positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Givaudan position performs unexpectedly, Premier African 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 Premier African will offset losses from the drop in Premier African's long position.

The idea behind Givaudan SA and Premier African Minerals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.