Correlation Between Novo Nordisk and CSL
Can any of the company-specific risk be diversified away by investing in both Novo Nordisk and CSL 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 CSL 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 CSL LTD SPONADR, you can compare the effects of market volatilities on Novo Nordisk and CSL 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 CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Nordisk and CSL.
Diversification Opportunities for Novo Nordisk and CSL
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Novo and CSL is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and CSL LTD SPONADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL LTD SPONADR 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 CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL LTD SPONADR has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and CSL go up and down completely randomly.
Pair Corralation between Novo Nordisk and CSL
Assuming the 90 days trading horizon Novo Nordisk AS is expected to generate 1.33 times more return on investment than CSL. However, Novo Nordisk is 1.33 times more volatile than CSL LTD SPONADR. It trades about 0.05 of its potential returns per unit of risk. CSL LTD SPONADR is currently generating about 0.0 per unit of risk. If you would invest 7,249 in Novo Nordisk AS on August 31, 2024 and sell it today you would earn a total of 2,801 from holding Novo Nordisk AS or generate 38.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novo Nordisk AS vs. CSL LTD SPONADR
Performance |
| Timeline |
| Novo Nordisk AS |
| CSL LTD SPONADR |
Novo Nordisk and CSL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novo Nordisk and CSL
The main advantage of trading using opposite Novo Nordisk and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.| Novo Nordisk vs. The Hanover Insurance | Novo Nordisk vs. Clearside Biomedical | Novo Nordisk vs. Compugroup Medical SE | Novo Nordisk vs. QBE Insurance Group |
| CSL vs. Superior Plus Corp | CSL vs. NMI Holdings | CSL vs. Origin Agritech | CSL vs. SIVERS SEMICONDUCTORS AB |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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