Correlation Between Bavarian Nordic and Novo Nordisk
Can any of the company-specific risk be diversified away by investing in both Bavarian Nordic and Novo Nordisk 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 Bavarian Nordic and Novo Nordisk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bavarian Nordic and Novo Nordisk AS, you can compare the effects of market volatilities on Bavarian Nordic and Novo Nordisk 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 Bavarian Nordic with a short position of Novo Nordisk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bavarian Nordic and Novo Nordisk.
Diversification Opportunities for Bavarian Nordic and Novo Nordisk
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bavarian and Novo is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bavarian Nordic and Novo Nordisk AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novo Nordisk AS and Bavarian Nordic 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 Bavarian Nordic are associated (or correlated) with Novo Nordisk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novo Nordisk AS has no effect on the direction of Bavarian Nordic i.e., Bavarian Nordic and Novo Nordisk go up and down completely randomly.
Pair Corralation between Bavarian Nordic and Novo Nordisk
Assuming the 90 days trading horizon Bavarian Nordic is expected to generate 1.24 times more return on investment than Novo Nordisk. However, Bavarian Nordic is 1.24 times more volatile than Novo Nordisk AS. It trades about 0.04 of its potential returns per unit of risk. Novo Nordisk AS is currently generating about -0.07 per unit of risk. If you would invest 17,890 in Bavarian Nordic on November 3, 2024 and sell it today you would earn a total of 1,865 from holding Bavarian Nordic or generate 10.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bavarian Nordic vs. Novo Nordisk AS
Performance |
| Timeline |
| Bavarian Nordic |
| Novo Nordisk AS |
Bavarian Nordic and Novo Nordisk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bavarian Nordic and Novo Nordisk
The main advantage of trading using opposite Bavarian Nordic and Novo Nordisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bavarian Nordic position performs unexpectedly, Novo Nordisk 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 Novo Nordisk will offset losses from the drop in Novo Nordisk's long position.| Bavarian Nordic vs. Ambu AS | Bavarian Nordic vs. Danske Bank AS | Bavarian Nordic vs. Genmab AS | Bavarian Nordic vs. DSV Panalpina AS |
| Novo Nordisk vs. Vestas Wind Systems | Novo Nordisk vs. Danske Bank AS | Novo Nordisk vs. Bavarian Nordic | Novo Nordisk vs. DSV Panalpina AS |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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