Correlation Between Connect Biopharma and Novo Nordisk
Can any of the company-specific risk be diversified away by investing in both Connect Biopharma 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 Connect Biopharma and Novo Nordisk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Connect Biopharma Holdings and Novo Nordisk AS, you can compare the effects of market volatilities on Connect Biopharma 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 Connect Biopharma with a short position of Novo Nordisk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Connect Biopharma and Novo Nordisk.
Diversification Opportunities for Connect Biopharma and Novo Nordisk
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Connect and Novo is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Connect Biopharma Holdings 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 Connect Biopharma 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 Connect Biopharma Holdings 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 Connect Biopharma i.e., Connect Biopharma and Novo Nordisk go up and down completely randomly.
Pair Corralation between Connect Biopharma and Novo Nordisk
Given the investment horizon of 90 days Connect Biopharma Holdings is expected to generate 3.25 times more return on investment than Novo Nordisk. However, Connect Biopharma is 3.25 times more volatile than Novo Nordisk AS. It trades about 0.16 of its potential returns per unit of risk. Novo Nordisk AS is currently generating about 0.04 per unit of risk. If you would invest 105.00 in Connect Biopharma Holdings on September 12, 2024 and sell it today you would earn a total of 18.00 from holding Connect Biopharma Holdings or generate 17.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Connect Biopharma Holdings vs. Novo Nordisk AS
Performance |
| Timeline |
| Connect Biopharma |
| Novo Nordisk AS |
Connect Biopharma and Novo Nordisk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Connect Biopharma and Novo Nordisk
The main advantage of trading using opposite Connect Biopharma and Novo Nordisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Connect Biopharma 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.| Connect Biopharma vs. Equillium | Connect Biopharma vs. DiaMedica Therapeutics | Connect Biopharma vs. Valneva SE ADR | Connect Biopharma vs. Vivani Medical |
| Novo Nordisk vs. Regeneron Pharmaceuticals | Novo Nordisk vs. Crispr Therapeutics AG | Novo Nordisk vs. Sarepta Therapeutics | Novo Nordisk vs. Intellia Therapeutics |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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