Correlation Between Dow Jones and Novo Nordisk
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Novo Nordisk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Novo Nordisk AS, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Novo Nordisk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Novo Nordisk.
Diversification Opportunities for Dow Jones and Novo Nordisk
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dow and Novo is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Novo Nordisk go up and down completely randomly.
Pair Corralation between Dow Jones and Novo Nordisk
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.36 times more return on investment than Novo Nordisk. However, Dow Jones Industrial is 2.74 times less risky than Novo Nordisk. It trades about 0.12 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 3,640,493 in Dow Jones Industrial on September 4, 2024 and sell it today you would earn a total of 837,707 from holding Dow Jones Industrial or generate 23.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.01% |
| Values | Daily Returns |
Dow Jones Industrial vs. Novo Nordisk AS
Performance |
| Timeline |
Dow Jones and Novo Nordisk Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Novo Nordisk AS
Pair trading matchups for Novo Nordisk
Pair Trading with Dow Jones and Novo Nordisk
The main advantage of trading using opposite Dow Jones and Novo Nordisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Gentex | Dow Jones vs. American Axle Manufacturing | Dow Jones vs. Pearson PLC ADR | Dow Jones vs. Marine Products |
| Novo Nordisk vs. HYDROFARM HLD GRP | Novo Nordisk vs. Australian Agricultural | Novo Nordisk vs. Sumitomo Mitsui Construction | Novo Nordisk vs. TITAN MACHINERY |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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