Correlation Between Mercedes-Benz Group and Novo Nordisk
Can any of the company-specific risk be diversified away by investing in both Mercedes-Benz Group 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 Mercedes-Benz Group and Novo Nordisk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mercedes Benz Group AG and Novo Nordisk AS, you can compare the effects of market volatilities on Mercedes-Benz Group 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 Mercedes-Benz Group with a short position of Novo Nordisk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mercedes-Benz Group and Novo Nordisk.
Diversification Opportunities for Mercedes-Benz Group and Novo Nordisk
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Mercedes-Benz and Novo is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Mercedes Benz Group AG 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 Mercedes-Benz Group 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 Mercedes Benz Group AG 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 Mercedes-Benz Group i.e., Mercedes-Benz Group and Novo Nordisk go up and down completely randomly.
Pair Corralation between Mercedes-Benz Group and Novo Nordisk
Assuming the 90 days horizon Mercedes Benz Group AG is expected to generate 0.6 times more return on investment than Novo Nordisk. However, Mercedes Benz Group AG is 1.67 times less risky than Novo Nordisk. It trades about 0.08 of its potential returns per unit of risk. Novo Nordisk AS is currently generating about 0.05 per unit of risk. If you would invest 5,810 in Mercedes Benz Group AG on November 27, 2024 and sell it today you would earn a total of 140.00 from holding Mercedes Benz Group AG or generate 2.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mercedes Benz Group AG vs. Novo Nordisk AS
Performance |
| Timeline |
| Mercedes Benz Group |
| Novo Nordisk AS |
Mercedes-Benz Group and Novo Nordisk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mercedes-Benz Group and Novo Nordisk
The main advantage of trading using opposite Mercedes-Benz Group and Novo Nordisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mercedes-Benz Group 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.| Mercedes-Benz Group vs. Addus HomeCare | Mercedes-Benz Group vs. FONIX MOBILE PLC | Mercedes-Benz Group vs. Warner Music Group | Mercedes-Benz Group vs. UNIVERSAL MUSIC GROUP |
| Novo Nordisk vs. SCANSOURCE | Novo Nordisk vs. China Resources Beer | Novo Nordisk vs. CanSino Biologics | Novo Nordisk vs. National Beverage Corp |
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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