Correlation Between International Flavors and DL Industries

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

By analyzing existing cross correlation between International Flavors Fragrances and DL Industries ADR, you can compare the effects of market volatilities on International Flavors and DL Industries 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 International Flavors with a short position of DL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Flavors and DL Industries.

Diversification Opportunities for International Flavors and DL Industries

-0.67

Correlation Coefficient

International Flavors  DL Industries

Excellent diversification

The 3 months correlation between International and DLNDY is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding International Flavors Fragranc and DL Industries ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DL Industries ADR and International Flavors 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 International Flavors Fragrances are associated (or correlated) with DL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DL Industries ADR has no effect on the direction of International Flavors i.e., International Flavors and DL Industries go up and down completely randomly.

Pair Corralation between International Flavors and DL Industries

Considering the 90-day investment horizon International Flavors Fragrances is expected to generate 0.74 times more return on investment than DL Industries. However, International Flavors Fragrances is 1.35 times less risky than DL Industries. It trades about 0.04 of its potential returns per unit of risk. DL Industries ADR is currently generating about -0.01 per unit of risk. If you would invest  7,539  in International Flavors Fragrances on January 25, 2024 and sell it today you would earn a total of  957.00  from holding International Flavors Fragrances or generate 12.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.56%
Values	Daily Returns

International Flavors Fragranc  vs.  DL Industries ADR

International Flavors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Flavors Fragrances are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, International Flavors is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

DL Industries ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DL Industries ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with International Flavors and DL Industries

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

The idea behind International Flavors Fragrances and DL Industries ADR 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.