Correlation Between Novo Nordisk and ChitogenX
Can any of the company-specific risk be diversified away by investing in both Novo Nordisk and ChitogenX 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 Novo Nordisk and ChitogenX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novo Nordisk AS and ChitogenX, you can compare the effects of market volatilities on Novo Nordisk and ChitogenX 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 Novo Nordisk with a short position of ChitogenX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Nordisk and ChitogenX.
Diversification Opportunities for Novo Nordisk and ChitogenX
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Novo and ChitogenX is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and ChitogenX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChitogenX and Novo Nordisk 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 Novo Nordisk AS are associated (or correlated) with ChitogenX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChitogenX has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and ChitogenX go up and down completely randomly.
Pair Corralation between Novo Nordisk and ChitogenX
Assuming the 90 days horizon Novo Nordisk AS is expected to generate 0.29 times more return on investment than ChitogenX. However, Novo Nordisk AS is 3.39 times less risky than ChitogenX. It trades about -0.13 of its potential returns per unit of risk. ChitogenX is currently generating about -0.23 per unit of risk. If you would invest 11,315 in Novo Nordisk AS on August 28, 2024 and sell it today you would lose (864.00) from holding Novo Nordisk AS or give up 7.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Novo Nordisk AS vs. ChitogenX
Performance |
| Timeline |
| Novo Nordisk AS |
| ChitogenX |
Novo Nordisk and ChitogenX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novo Nordisk and ChitogenX
The main advantage of trading using opposite Novo Nordisk and ChitogenX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, ChitogenX 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 ChitogenX will offset losses from the drop in ChitogenX's long position.The idea behind Novo Nordisk AS and ChitogenX pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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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