Correlation Between SGS SA and Givaudan

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

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

Diversification Opportunities for SGS SA and Givaudan

0.92

Correlation Coefficient

SGS SA  Givaudan

Almost no diversification

The 3 months correlation between SGS and Givaudan is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and SGS SA 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 SGS SA 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 SGS SA i.e., SGS SA and Givaudan go up and down completely randomly.

Pair Corralation between SGS SA and Givaudan

Assuming the 90 days trading horizon SGS SA is expected to generate 1.27 times more return on investment than Givaudan. However, SGS SA is 1.27 times more volatile than Givaudan SA. It trades about 0.04 of its potential returns per unit of risk. Givaudan SA is currently generating about -0.05 per unit of risk. If you would invest  8,214  in SGS SA on August 31, 2024 and sell it today you would earn a total of  534.00  from holding SGS SA or generate 6.5% return on investment over 90 days.

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

SGS SA  vs.  Givaudan SA

SGS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated 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 abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with SGS SA and Givaudan

The main advantage of trading using opposite SGS SA and Givaudan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SGS SA 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 SGS SA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.