Correlation Between CSL and Novo Nordisk
Can any of the company-specific risk be diversified away by investing in both CSL 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 CSL and Novo Nordisk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSL LTD SPONADR and Novo Nordisk AS, you can compare the effects of market volatilities on CSL 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 CSL with a short position of Novo Nordisk. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and Novo Nordisk.
Diversification Opportunities for CSL and Novo Nordisk
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CSL and Novo is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CSL LTD SPONADR 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 CSL 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 CSL LTD SPONADR 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 CSL i.e., CSL and Novo Nordisk go up and down completely randomly.
Pair Corralation between CSL and Novo Nordisk
Assuming the 90 days trading horizon CSL LTD SPONADR is expected to generate 0.33 times more return on investment than Novo Nordisk. However, CSL LTD SPONADR is 3.04 times less risky than Novo Nordisk. It trades about -0.05 of its potential returns per unit of risk. Novo Nordisk AS is currently generating about -0.06 per unit of risk. If you would invest 8,300 in CSL LTD SPONADR on November 2, 2024 and sell it today you would lose (100.00) from holding CSL LTD SPONADR or give up 1.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSL LTD SPONADR vs. Novo Nordisk AS
Performance |
| Timeline |
| CSL LTD SPONADR |
| Novo Nordisk AS |
CSL and Novo Nordisk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSL and Novo Nordisk
The main advantage of trading using opposite CSL and Novo Nordisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL 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.| CSL vs. AGNC INVESTMENT | CSL vs. Guangdong Investment Limited | CSL vs. VULCAN MATERIALS | CSL vs. Martin Marietta Materials |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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