Correlation Between Halma Plc and Novozymes

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

By analyzing existing cross correlation between Halma plc and Novozymes AS B, you can compare the effects of market volatilities on Halma Plc and Novozymes 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 Halma Plc with a short position of Novozymes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Halma Plc and Novozymes.

Diversification Opportunities for Halma Plc and Novozymes

0.27

Correlation Coefficient

Halma Plc  Novozymes

Modest diversification

The 3 months correlation between Halma and Novozymes is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Halma plc 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 Halma Plc 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 Halma plc are associated (or correlated) with Novozymes. 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 Halma Plc i.e., Halma Plc and Novozymes go up and down completely randomly.

Pair Corralation between Halma Plc and Novozymes

Assuming the 90 days horizon Halma Plc is expected to generate 1.12 times less return on investment than Novozymes. But when comparing it to its historical volatility, Halma plc is 1.09 times less risky than Novozymes. It trades about 0.05 of its potential returns per unit of risk. Novozymes AS B is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,209  in Novozymes AS B on September 12, 2024 and sell it today you would earn a total of  1,581  from holding Novozymes AS B or generate 37.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	89.51%
Values	Daily Returns

Halma plc  vs.  Novozymes AS B

Halma plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Halma plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Halma Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Novozymes AS B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novozymes AS B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Halma Plc and Novozymes

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

The idea behind Halma plc 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.

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.