Correlation Between Novo Nordisk and Bavarian Nordic
Can any of the company-specific risk be diversified away by investing in both Novo Nordisk and Bavarian Nordic 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 Bavarian Nordic 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 Bavarian Nordic, you can compare the effects of market volatilities on Novo Nordisk and Bavarian Nordic 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 Bavarian Nordic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Nordisk and Bavarian Nordic.
Diversification Opportunities for Novo Nordisk and Bavarian Nordic
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Novo and Bavarian is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Bavarian Nordic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bavarian Nordic 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 Bavarian Nordic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bavarian Nordic has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Bavarian Nordic go up and down completely randomly.
Pair Corralation between Novo Nordisk and Bavarian Nordic
Assuming the 90 days trading horizon Novo Nordisk is expected to generate 1.4 times less return on investment than Bavarian Nordic. But when comparing it to its historical volatility, Novo Nordisk AS is 1.71 times less risky than Bavarian Nordic. It trades about 0.04 of its potential returns per unit of risk. Bavarian Nordic is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 16,990 in Bavarian Nordic on September 2, 2024 and sell it today you would earn a total of 2,350 from holding Bavarian Nordic or generate 13.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novo Nordisk AS vs. Bavarian Nordic
Performance |
| Timeline |
| Novo Nordisk AS |
| Bavarian Nordic |
Novo Nordisk and Bavarian Nordic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novo Nordisk and Bavarian Nordic
The main advantage of trading using opposite Novo Nordisk and Bavarian Nordic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, Bavarian Nordic 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 Bavarian Nordic will offset losses from the drop in Bavarian Nordic's long position.| Novo Nordisk vs. Vestas Wind Systems | Novo Nordisk vs. Danske Bank AS | Novo Nordisk vs. Bavarian Nordic | Novo Nordisk vs. DSV Panalpina AS |
| Bavarian Nordic vs. Ambu AS | Bavarian Nordic vs. Danske Bank AS | Bavarian Nordic vs. Genmab AS | Bavarian Nordic vs. DSV Panalpina AS |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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