Correlation Between Novo Nordisk and Novavax
Can any of the company-specific risk be diversified away by investing in both Novo Nordisk and Novavax 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 Novavax 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 Novavax, you can compare the effects of market volatilities on Novo Nordisk and Novavax 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 Novavax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Nordisk and Novavax.
Diversification Opportunities for Novo Nordisk and Novavax
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Novo and Novavax is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Novavax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novavax 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 Novavax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novavax has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Novavax go up and down completely randomly.
Pair Corralation between Novo Nordisk and Novavax
Assuming the 90 days trading horizon Novo Nordisk is expected to generate 369.05 times less return on investment than Novavax. But when comparing it to its historical volatility, Novo Nordisk AS is 5.03 times less risky than Novavax. It trades about 0.0 of its potential returns per unit of risk. Novavax is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 371.00 in Novavax on August 29, 2024 and sell it today you would earn a total of 467.00 from holding Novavax or generate 125.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.53% |
| Values | Daily Returns |
Novo Nordisk AS vs. Novavax
Performance |
| Timeline |
| Novo Nordisk AS |
| Novavax |
Novo Nordisk and Novavax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novo Nordisk and Novavax
The main advantage of trading using opposite Novo Nordisk and Novavax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, Novavax 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 Novavax will offset losses from the drop in Novavax's long position.| Novo Nordisk vs. Mercedes Benz Group AG | Novo Nordisk vs. Superior Plus Corp | Novo Nordisk vs. NMI Holdings | Novo Nordisk 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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