Correlation Between Novozymes A/S and Sika AG
Can any of the company-specific risk be diversified away by investing in both Novozymes A/S and Sika AG 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 Novozymes A/S and Sika AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novozymes AS B and Sika AG, you can compare the effects of market volatilities on Novozymes A/S and Sika AG 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 Novozymes A/S with a short position of Sika AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novozymes A/S and Sika AG.
Diversification Opportunities for Novozymes A/S and Sika AG
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Novozymes and Sika is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Novozymes AS B and Sika AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sika AG and Novozymes A/S 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 Novozymes AS B are associated (or correlated) with Sika AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sika AG has no effect on the direction of Novozymes A/S i.e., Novozymes A/S and Sika AG go up and down completely randomly.
Pair Corralation between Novozymes A/S and Sika AG
Assuming the 90 days horizon Novozymes AS B is expected to under-perform the Sika AG. But the pink sheet apears to be less risky and, when comparing its historical volatility, Novozymes AS B is 1.29 times less risky than Sika AG. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Sika AG is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 28,179 in Sika AG on August 28, 2024 and sell it today you would lose (1,657) from holding Sika AG or give up 5.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novozymes AS B vs. Sika AG
Performance |
| Timeline |
| Novozymes AS B |
| Sika AG |
Novozymes A/S and Sika AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novozymes A/S and Sika AG
The main advantage of trading using opposite Novozymes A/S and Sika AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novozymes A/S position performs unexpectedly, Sika AG 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 Sika AG will offset losses from the drop in Sika AG's long position.| Novozymes A/S vs. First Graphene | Novozymes A/S vs. HUMANA INC | Novozymes A/S vs. Aquagold International | Novozymes A/S vs. Barloworld Ltd 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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