Correlation Between Novo Nordisk and Erria AS
Can any of the company-specific risk be diversified away by investing in both Novo Nordisk and Erria AS 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 Erria AS 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 Erria AS, you can compare the effects of market volatilities on Novo Nordisk and Erria AS 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 Erria AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Nordisk and Erria AS.
Diversification Opportunities for Novo Nordisk and Erria AS
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Novo and Erria is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Erria AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erria AS 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 Erria AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erria AS has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Erria AS go up and down completely randomly.
Pair Corralation between Novo Nordisk and Erria AS
Assuming the 90 days trading horizon Novo Nordisk AS is expected to generate 0.63 times more return on investment than Erria AS. However, Novo Nordisk AS is 1.59 times less risky than Erria AS. It trades about 0.05 of its potential returns per unit of risk. Erria AS is currently generating about -0.01 per unit of risk. If you would invest 66,185 in Novo Nordisk AS on September 4, 2024 and sell it today you would earn a total of 12,045 from holding Novo Nordisk AS or generate 18.2% 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. Erria AS
Performance |
| Timeline |
| Novo Nordisk AS |
| Erria AS |
Novo Nordisk and Erria AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novo Nordisk and Erria AS
The main advantage of trading using opposite Novo Nordisk and Erria AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, Erria AS 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 Erria AS will offset losses from the drop in Erria AS'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 |
| Erria AS vs. Strategic Investments AS | Erria AS vs. Scandinavian Medical Solutions | Erria AS vs. Scandinavian Tobacco Group | Erria AS vs. Vestjysk Bank 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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