Correlation Between Novo Nordisk and Nordea Bank
Can any of the company-specific risk be diversified away by investing in both Novo Nordisk and Nordea 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 Nordea 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 Nordea Bank Abp, you can compare the effects of market volatilities on Novo Nordisk and Nordea 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 Nordea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Nordisk and Nordea Bank.
Diversification Opportunities for Novo Nordisk and Nordea Bank
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Novo and Nordea is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Nordea Bank Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea Bank Abp 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 Nordea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea Bank Abp has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Nordea Bank go up and down completely randomly.
Pair Corralation between Novo Nordisk and Nordea Bank
Assuming the 90 days trading horizon Novo Nordisk AS is expected to generate 1.92 times more return on investment than Nordea Bank. However, Novo Nordisk is 1.92 times more volatile than Nordea Bank Abp. It trades about -0.06 of its potential returns per unit of risk. Nordea Bank Abp is currently generating about -0.12 per unit of risk. If you would invest 77,060 in Novo Nordisk AS on August 28, 2024 and sell it today you would lose (2,520) from holding Novo Nordisk AS or give up 3.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Novo Nordisk AS vs. Nordea Bank Abp
Performance |
| Timeline |
| Novo Nordisk AS |
| Nordea Bank Abp |
Novo Nordisk and Nordea Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novo Nordisk and Nordea Bank
The main advantage of trading using opposite Novo Nordisk and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, Nordea 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 Nordea Bank will offset losses from the drop in Nordea Bank'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 |
| Nordea Bank vs. Jyske Bank AS | Nordea Bank vs. Tryg AS | Nordea Bank vs. Danske Bank AS | Nordea Bank vs. ISS 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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