Correlation Between CAP LEASE and Givaudan

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

By analyzing existing cross correlation between CAP LEASE AVIATION and Givaudan SA, you can compare the effects of market volatilities on CAP LEASE 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 CAP LEASE with a short position of Givaudan. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAP LEASE and Givaudan.

Diversification Opportunities for CAP LEASE and Givaudan

0.88

Correlation Coefficient

CAP LEASE  Givaudan

Very poor diversification

The 3 months correlation between CAP and Givaudan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding CAP LEASE AVIATION and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and CAP LEASE 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 CAP LEASE AVIATION 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 CAP LEASE i.e., CAP LEASE and Givaudan go up and down completely randomly.

Pair Corralation between CAP LEASE and Givaudan

Assuming the 90 days trading horizon CAP LEASE AVIATION is expected to under-perform the Givaudan. In addition to that, CAP LEASE is 2.01 times more volatile than Givaudan SA. It trades about -0.14 of its total potential returns per unit of risk. Givaudan SA is currently generating about 0.3 per unit of volatility. If you would invest  379,681  in Givaudan SA on September 19, 2024 and sell it today you would earn a total of  22,369  from holding Givaudan SA or generate 5.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

CAP LEASE AVIATION  vs.  Givaudan SA

CAP LEASE AVIATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAP LEASE AVIATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 unsteady 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.

Pair Trading with CAP LEASE and Givaudan

The main advantage of trading using opposite CAP LEASE and Givaudan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAP LEASE 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 CAP LEASE AVIATION 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.