Correlation Between Novo Nordisk and Nordfyns Bank
Can any of the company-specific risk be diversified away by investing in both Novo Nordisk and Nordfyns 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 Nordfyns 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 Nordfyns Bank AS, you can compare the effects of market volatilities on Novo Nordisk and Nordfyns 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 Nordfyns Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Nordisk and Nordfyns Bank.
Diversification Opportunities for Novo Nordisk and Nordfyns Bank
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Novo and Nordfyns is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Nordfyns Bank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordfyns Bank 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 Nordfyns Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordfyns Bank AS has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Nordfyns Bank go up and down completely randomly.
Pair Corralation between Novo Nordisk and Nordfyns Bank
Assuming the 90 days trading horizon Novo Nordisk AS is expected to under-perform the Nordfyns Bank. In addition to that, Novo Nordisk is 2.84 times more volatile than Nordfyns Bank AS. It trades about -0.07 of its total potential returns per unit of risk. Nordfyns Bank AS is currently generating about -0.1 per unit of volatility. If you would invest 35,000 in Nordfyns Bank AS on August 30, 2024 and sell it today you would lose (3,200) from holding Nordfyns Bank AS or give up 9.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novo Nordisk AS vs. Nordfyns Bank AS
Performance |
| Timeline |
| Novo Nordisk AS |
| Nordfyns Bank AS |
Novo Nordisk and Nordfyns Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novo Nordisk and Nordfyns Bank
The main advantage of trading using opposite Novo Nordisk and Nordfyns Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, Nordfyns 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 Nordfyns Bank will offset losses from the drop in Nordfyns 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 |
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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