Correlation Between Novozymes A/S and Orion Engineered

Can any of the company-specific risk be diversified away by investing in both Novozymes A/S and Orion Engineered 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 Orion Engineered 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 Orion Engineered Carbons, you can compare the effects of market volatilities on Novozymes A/S and Orion Engineered 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 Orion Engineered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novozymes A/S and Orion Engineered.

Diversification Opportunities for Novozymes A/S and Orion Engineered

-0.48

Correlation Coefficient

Novozymes A/S  Orion Engineered

Very good diversification

The 3 months correlation between Novozymes and Orion is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Novozymes AS B and Orion Engineered Carbons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orion Engineered Carbons 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 Orion Engineered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orion Engineered Carbons has no effect on the direction of Novozymes A/S i.e., Novozymes A/S and Orion Engineered go up and down completely randomly.

Pair Corralation between Novozymes A/S and Orion Engineered

Assuming the 90 days horizon Novozymes AS B is expected to generate 1.26 times more return on investment than Orion Engineered. However, Novozymes A/S is 1.26 times more volatile than Orion Engineered Carbons. It trades about 0.05 of its potential returns per unit of risk. Orion Engineered Carbons is currently generating about -0.08 per unit of risk. If you would invest  5,551  in Novozymes AS B on December 29, 2024 and sell it today you would earn a total of  316.00  from holding Novozymes AS B or generate 5.69% return on investment over 90 days.

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

Novozymes AS B  vs.  Orion Engineered Carbons

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.

Orion Engineered Carbons

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orion Engineered Carbons has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Novozymes A/S and Orion Engineered

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

The idea behind Novozymes AS B and Orion Engineered Carbons 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.