Correlation Between Novo Nordisk and Zai Lab
Can any of the company-specific risk be diversified away by investing in both Novo Nordisk and Zai Lab 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 Zai Lab 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 Zai Lab, you can compare the effects of market volatilities on Novo Nordisk and Zai Lab 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 Zai Lab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Nordisk and Zai Lab.
Diversification Opportunities for Novo Nordisk and Zai Lab
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Novo and Zai is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Zai Lab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zai Lab 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 Zai Lab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zai Lab has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Zai Lab go up and down completely randomly.
Pair Corralation between Novo Nordisk and Zai Lab
Assuming the 90 days horizon Novo Nordisk AS is expected to generate 0.58 times more return on investment than Zai Lab. However, Novo Nordisk AS is 1.73 times less risky than Zai Lab. It trades about 0.05 of its potential returns per unit of risk. Zai Lab is currently generating about 0.0 per unit of risk. If you would invest 6,793 in Novo Nordisk AS on September 1, 2024 and sell it today you would earn a total of 3,890 from holding Novo Nordisk AS or generate 57.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novo Nordisk AS vs. Zai Lab
Performance |
| Timeline |
| Novo Nordisk AS |
| Zai Lab |
Novo Nordisk and Zai Lab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novo Nordisk and Zai Lab
The main advantage of trading using opposite Novo Nordisk and Zai Lab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, Zai Lab 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 Zai Lab will offset losses from the drop in Zai Lab's long position.| Novo Nordisk vs. Rigel Pharmaceuticals | Novo Nordisk vs. Geron | Novo Nordisk vs. Verastem | Novo Nordisk vs. Immutep Ltd ADR |
| Zai Lab vs. C4 Therapeutics | Zai Lab vs. Erasca Inc | Zai Lab vs. Cullinan Oncology LLC | Zai Lab vs. Legend Biotech 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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