Correlation Between International Flavors and Novozymes A/S

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

Diversification Opportunities for International Flavors and Novozymes A/S

0.28

Correlation Coefficient

International Flavors  Novozymes A/S

Modest diversification

The 3 months correlation between International and Novozymes is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding International Flavors Fragranc 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 International Flavors 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 International Flavors Fragrances 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 International Flavors i.e., International Flavors and Novozymes A/S go up and down completely randomly.

Pair Corralation between International Flavors and Novozymes A/S

Considering the 90-day investment horizon International Flavors Fragrances is expected to under-perform the Novozymes A/S. But the stock apears to be less risky and, when comparing its historical volatility, International Flavors Fragrances is 2.3 times less risky than Novozymes A/S. The stock trades about -0.15 of its potential returns per unit of risk. The Novozymes AS B is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,714  in Novozymes AS B on December 2, 2024 and sell it today you would earn a total of  351.00  from holding Novozymes AS B or generate 6.14% return on investment over 90 days.

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

International Flavors Fragranc  vs.  Novozymes AS B

International Flavors

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Flavors Fragrances has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 International Flavors and Novozymes A/S

The main advantage of trading using opposite International Flavors and Novozymes A/S positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Flavors 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 International Flavors Fragrances 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.