Correlation Between Givaudan and Johnson Matthey

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

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

Diversification Opportunities for Givaudan and Johnson Matthey

0.38

Correlation Coefficient

Givaudan  Johnson Matthey

Weak diversification

The 3 months correlation between Givaudan and Johnson is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA and Johnson Matthey PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Matthey PLC 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 are associated (or correlated) with Johnson Matthey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Matthey PLC has no effect on the direction of Givaudan i.e., Givaudan and Johnson Matthey go up and down completely randomly.

Pair Corralation between Givaudan and Johnson Matthey

Assuming the 90 days trading horizon Givaudan SA is expected to under-perform the Johnson Matthey. But the stock apears to be less risky and, when comparing its historical volatility, Givaudan SA is 1.61 times less risky than Johnson Matthey. The stock trades about -0.58 of its potential returns per unit of risk. The Johnson Matthey PLC is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  172,900  in Johnson Matthey PLC on April 16, 2025 and sell it today you would earn a total of  13,200  from holding Johnson Matthey PLC or generate 7.63% return on investment over 90 days.

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

Givaudan SA  vs.  Johnson Matthey PLC

Givaudan SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Givaudan SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Givaudan is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Johnson Matthey PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Matthey PLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Johnson Matthey unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Givaudan and Johnson Matthey

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

The idea behind Givaudan SA and Johnson Matthey PLC 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..