Correlation Between Defence Therapeutics and Novo Nordisk
Can any of the company-specific risk be diversified away by investing in both Defence Therapeutics 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 Defence Therapeutics and Novo Nordisk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Defence Therapeutics and Novo Nordisk AS, you can compare the effects of market volatilities on Defence Therapeutics 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 Defence Therapeutics with a short position of Novo Nordisk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defence Therapeutics and Novo Nordisk.
Diversification Opportunities for Defence Therapeutics and Novo Nordisk
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Defence and Novo is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Defence Therapeutics 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 Defence Therapeutics 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 Defence Therapeutics 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 Defence Therapeutics i.e., Defence Therapeutics and Novo Nordisk go up and down completely randomly.
Pair Corralation between Defence Therapeutics and Novo Nordisk
Assuming the 90 days horizon Defence Therapeutics is expected to generate 2.33 times less return on investment than Novo Nordisk. But when comparing it to its historical volatility, Defence Therapeutics is 3.74 times less risky than Novo Nordisk. It trades about 0.21 of its potential returns per unit of risk. Novo Nordisk AS is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 10,543 in Novo Nordisk AS on September 13, 2024 and sell it today you would earn a total of 557.00 from holding Novo Nordisk AS or generate 5.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Defence Therapeutics vs. Novo Nordisk AS
Performance |
| Timeline |
| Defence Therapeutics |
| Novo Nordisk AS |
Defence Therapeutics and Novo Nordisk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Defence Therapeutics and Novo Nordisk
The main advantage of trading using opposite Defence Therapeutics and Novo Nordisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Defence Therapeutics 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.| Defence Therapeutics vs. Sino Biopharmaceutical Ltd | Defence Therapeutics vs. Institute of Biomedical | Defence Therapeutics vs. Aileron Therapeutics | Defence Therapeutics vs. Enlivex Therapeutics |
| Novo Nordisk vs. Nuvalent | Novo Nordisk vs. Arcellx | Novo Nordisk vs. Vaxcyte | Novo Nordisk vs. Viridian 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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