Correlation Between Novozymes and Givaudan
Can any of the company-specific risk be diversified away by investing in both Novozymes and Givaudan 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 and Givaudan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novozymes AS and Givaudan SA, you can compare the effects of market volatilities on Novozymes and Givaudan 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 with a short position of Givaudan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novozymes and Givaudan.
Diversification Opportunities for Novozymes and Givaudan
Significant diversification
The 3 months correlation between Novozymes and Givaudan is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Novozymes AS and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA and Novozymes 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 are associated (or correlated) with Givaudan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Givaudan SA has no effect on the direction of Novozymes i.e., Novozymes and Givaudan go up and down completely randomly.
Pair Corralation between Novozymes and Givaudan
Assuming the 90 days horizon Novozymes AS is expected to generate 0.85 times more return on investment than Givaudan. However, Novozymes AS is 1.17 times less risky than Givaudan. It trades about 0.08 of its potential returns per unit of risk. Givaudan SA is currently generating about 0.0 per unit of risk. If you would invest 5,641 in Novozymes AS on December 6, 2024 and sell it today you would earn a total of 203.00 from holding Novozymes AS or generate 3.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Novozymes AS vs. Givaudan SA
Performance |
| Timeline |
| Novozymes AS |
| Givaudan SA |
Novozymes and Givaudan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novozymes and Givaudan
The main advantage of trading using opposite Novozymes and Givaudan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novozymes position performs unexpectedly, Givaudan 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 Givaudan will offset losses from the drop in Givaudan's long position.| Novozymes vs. Air Liquide SA | ||
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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