Correlation Between Bancolombia and Novozymes A/S

Can any of the company-specific risk be diversified away by investing in both Bancolombia 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 Bancolombia 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 Bancolombia SA ADR and Novozymes AS B, you can compare the effects of market volatilities on Bancolombia 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 Bancolombia with a short position of Novozymes A/S. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bancolombia and Novozymes A/S.

Diversification Opportunities for Bancolombia and Novozymes A/S

0.35

Correlation Coefficient

Bancolombia  Novozymes A/S

Weak diversification

The 3 months correlation between Bancolombia and Novozymes is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Bancolombia 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 Bancolombia 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 Bancolombia 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 Bancolombia i.e., Bancolombia and Novozymes A/S go up and down completely randomly.

Pair Corralation between Bancolombia and Novozymes A/S

Considering the 90-day investment horizon Bancolombia SA ADR is expected to generate 0.63 times more return on investment than Novozymes A/S. However, Bancolombia SA ADR is 1.58 times less risky than Novozymes A/S. It trades about 0.3 of its potential returns per unit of risk. Novozymes AS B is currently generating about 0.05 per unit of risk. If you would invest  3,167  in Bancolombia SA ADR on December 29, 2024 and sell it today you would earn a total of  1,212  from holding Bancolombia SA ADR or generate 38.27% return on investment over 90 days.

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

Bancolombia SA ADR  vs.  Novozymes AS B

Bancolombia SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bancolombia SA ADR are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward indicators, Bancolombia sustained solid returns over the last few months and may actually be approaching a breakup point.

Novozymes AS B

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Novozymes AS B are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Novozymes A/S may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bancolombia and Novozymes A/S

The main advantage of trading using opposite Bancolombia and Novozymes A/S positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bancolombia 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 Bancolombia 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.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.