Correlation Between Novo Nordisk and Lollands Bank

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Can any of the company-specific risk be diversified away by investing in both Novo Nordisk and Lollands Bank 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 Lollands Bank 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 Lollands Bank, you can compare the effects of market volatilities on Novo Nordisk and Lollands Bank 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 Lollands Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Nordisk and Lollands Bank.

Diversification Opportunities for Novo Nordisk and Lollands Bank

0.07
  Correlation Coefficient

Significant diversification

The 3 months correlation between Novo and Lollands is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Lollands Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lollands Bank 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 Lollands Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lollands Bank has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Lollands Bank go up and down completely randomly.

Pair Corralation between Novo Nordisk and Lollands Bank

Assuming the 90 days trading horizon Novo Nordisk AS is expected to under-perform the Lollands Bank. In addition to that, Novo Nordisk is 3.19 times more volatile than Lollands Bank. It trades about -0.14 of its total potential returns per unit of risk. Lollands Bank is currently generating about 0.14 per unit of volatility. If you would invest  55,500  in Lollands Bank on September 25, 2024 and sell it today you would earn a total of  2,500  from holding Lollands Bank or generate 4.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Novo Nordisk AS  vs.  Lollands Bank

 Performance 
       Timeline  
Novo Nordisk AS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Novo Nordisk AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Lollands Bank 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Lollands Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Lollands Bank is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Novo Nordisk and Lollands Bank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Novo Nordisk and Lollands Bank

The main advantage of trading using opposite Novo Nordisk and Lollands Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, Lollands Bank 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 Lollands Bank will offset losses from the drop in Lollands Bank's long position.
The idea behind Novo Nordisk AS and Lollands Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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