Correlation Between Glencore PLC and Givaudan

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

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

Diversification Opportunities for Glencore PLC and Givaudan

0.68

Correlation Coefficient

Glencore PLC  Givaudan

Poor diversification

The 3 months correlation between Glencore and Givaudan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and Glencore PLC 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 Glencore PLC 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 Glencore PLC i.e., Glencore PLC and Givaudan go up and down completely randomly.

Pair Corralation between Glencore PLC and Givaudan

Assuming the 90 days trading horizon Glencore PLC is expected to generate 1.66 times more return on investment than Givaudan. However, Glencore PLC is 1.66 times more volatile than Givaudan SA. It trades about -0.05 of its potential returns per unit of risk. Givaudan SA is currently generating about -0.14 per unit of risk. If you would invest  38,850  in Glencore PLC on September 19, 2024 and sell it today you would lose (2,620) from holding Glencore PLC or give up 6.74% of portfolio value over 90 days.

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

Glencore PLC  vs.  Givaudan SA

Glencore PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glencore PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Glencore PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 Glencore PLC and Givaudan

The main advantage of trading using opposite Glencore PLC and Givaudan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glencore PLC 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 Glencore PLC 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 CEOs Directory module to screen CEOs from public companies around the world.