Correlation Between Tomra Systems and Novozymes A/S

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

Diversification Opportunities for Tomra Systems and Novozymes A/S

0.33

Correlation Coefficient

Tomra Systems  Novozymes A/S

Weak diversification

The 3 months correlation between Tomra and Novozymes is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Tomra Systems ASA 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 Tomra Systems 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 Tomra Systems ASA 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 Tomra Systems i.e., Tomra Systems and Novozymes A/S go up and down completely randomly.

Pair Corralation between Tomra Systems and Novozymes A/S

Assuming the 90 days horizon Tomra Systems ASA is expected to generate 0.96 times more return on investment than Novozymes A/S. However, Tomra Systems ASA is 1.04 times less risky than Novozymes A/S. It trades about 0.1 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  1,286  in Tomra Systems ASA on December 29, 2024 and sell it today you would earn a total of  205.00  from holding Tomra Systems ASA or generate 15.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Tomra Systems ASA  vs.  Novozymes AS B

Tomra Systems ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tomra Systems ASA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Tomra Systems showed 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 Tomra Systems and Novozymes A/S

The main advantage of trading using opposite Tomra Systems and Novozymes A/S positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tomra Systems 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 Tomra Systems ASA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.