Correlation Between Novo Nordisk and Legend Biotech
Can any of the company-specific risk be diversified away by investing in both Novo Nordisk and Legend Biotech 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 Legend Biotech 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 Legend Biotech Corp, you can compare the effects of market volatilities on Novo Nordisk and Legend Biotech 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 Legend Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Nordisk and Legend Biotech.
Diversification Opportunities for Novo Nordisk and Legend Biotech
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Novo and Legend is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Legend Biotech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legend Biotech Corp 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 Legend Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legend Biotech Corp has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Legend Biotech go up and down completely randomly.
Pair Corralation between Novo Nordisk and Legend Biotech
Assuming the 90 days horizon Novo Nordisk AS is expected to generate 0.9 times more return on investment than Legend Biotech. However, Novo Nordisk AS is 1.11 times less risky than Legend Biotech. It trades about -0.03 of its potential returns per unit of risk. Legend Biotech Corp is currently generating about -0.1 per unit of risk. If you would invest 10,900 in Novo Nordisk AS on September 1, 2024 and sell it today you would lose (217.00) from holding Novo Nordisk AS or give up 1.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novo Nordisk AS vs. Legend Biotech Corp
Performance |
| Timeline |
| Novo Nordisk AS |
| Legend Biotech Corp |
Novo Nordisk and Legend Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novo Nordisk and Legend Biotech
The main advantage of trading using opposite Novo Nordisk and Legend Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, Legend Biotech 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 Legend Biotech will offset losses from the drop in Legend Biotech's long position.| Novo Nordisk vs. Rigel Pharmaceuticals | Novo Nordisk vs. Geron | Novo Nordisk vs. Verastem | Novo Nordisk vs. Immutep Ltd ADR |
| Legend Biotech vs. Vaxcyte | Legend Biotech vs. Apellis Pharmaceuticals | Legend Biotech vs. Travere Therapeutics | Legend Biotech vs. Akero 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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