Correlation Between Givaudan and Novozymes A/S
Can any of the company-specific risk be diversified away by investing in both Givaudan and Novozymes A/S 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 Novozymes A/S 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 Novozymes AS B, you can compare the effects of market volatilities on Givaudan and Novozymes A/S 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 Novozymes A/S. Check out your portfolio center. Please also check ongoing floating volatility patterns of Givaudan and Novozymes A/S.
Diversification Opportunities for Givaudan and Novozymes A/S
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Givaudan and Novozymes is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA ADR and Novozymes AS B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novozymes AS B 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 Novozymes A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novozymes AS B has no effect on the direction of Givaudan i.e., Givaudan and Novozymes A/S go up and down completely randomly.
Pair Corralation between Givaudan and Novozymes A/S
Assuming the 90 days horizon Givaudan is expected to generate 1.98 times less return on investment than Novozymes A/S. But when comparing it to its historical volatility, Givaudan SA ADR is 2.43 times less risky than Novozymes A/S. It trades about 0.03 of its potential returns per unit of risk. Novozymes AS B is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,552 in Novozymes AS B on August 27, 2024 and sell it today you would earn a total of 396.00 from holding Novozymes AS B or generate 7.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.21% |
| Values | Daily Returns |
Givaudan SA ADR vs. Novozymes AS B
Performance |
| Timeline |
| Givaudan SA ADR |
| Novozymes AS B |
Givaudan and Novozymes A/S Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Givaudan and Novozymes A/S
The main advantage of trading using opposite Givaudan and Novozymes A/S positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Givaudan position performs unexpectedly, Novozymes A/S 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 Novozymes A/S will offset losses from the drop in Novozymes A/S's long position.The idea behind Givaudan SA ADR and Novozymes AS B 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.| Novozymes A/S vs. Symrise Ag PK | Novozymes A/S vs. Givaudan SA | Novozymes A/S vs. Sika AG | Novozymes A/S vs. Sika AG ADR |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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