Correlation Between Givaudan and Alto Ingredients

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

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

Diversification Opportunities for Givaudan and Alto Ingredients

0.0

Correlation Coefficient

Givaudan  Alto Ingredients

Pay attention - limited upside

The 3 months correlation between Givaudan and Alto is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA ADR and Alto Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alto Ingredients 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 ADR are associated (or correlated) with Alto Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alto Ingredients has no effect on the direction of Givaudan i.e., Givaudan and Alto Ingredients go up and down completely randomly.

Pair Corralation between Givaudan and Alto Ingredients

Assuming the 90 days horizon Givaudan SA ADR is expected to generate 0.59 times more return on investment than Alto Ingredients. However, Givaudan SA ADR is 1.7 times less risky than Alto Ingredients. It trades about -0.18 of its potential returns per unit of risk. Alto Ingredients is currently generating about -0.41 per unit of risk. If you would invest  9,011  in Givaudan SA ADR on February 3, 2024 and sell it today you would lose (447.00) from holding Givaudan SA ADR or give up 4.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Givaudan SA ADR  vs.  Alto Ingredients

Givaudan SA ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Givaudan SA ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Givaudan is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Alto Ingredients

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alto Ingredients are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Alto Ingredients may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Givaudan and Alto Ingredients

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

The idea behind Givaudan SA ADR and Alto Ingredients 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.