Correlation Between Zealand Pharma and NKT AS
Can any of the company-specific risk be diversified away by investing in both Zealand Pharma and NKT 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 Zealand Pharma and NKT AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zealand Pharma AS and NKT AS, you can compare the effects of market volatilities on Zealand Pharma and NKT 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 Zealand Pharma with a short position of NKT AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zealand Pharma and NKT AS.
Diversification Opportunities for Zealand Pharma and NKT AS
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Zealand and NKT is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Zealand Pharma AS and NKT AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NKT AS and Zealand Pharma 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 Zealand Pharma AS are associated (or correlated) with NKT AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NKT AS has no effect on the direction of Zealand Pharma i.e., Zealand Pharma and NKT AS go up and down completely randomly.
Pair Corralation between Zealand Pharma and NKT AS
Assuming the 90 days trading horizon Zealand Pharma AS is expected to generate 2.2 times more return on investment than NKT AS. However, Zealand Pharma is 2.2 times more volatile than NKT AS. It trades about 0.07 of its potential returns per unit of risk. NKT AS is currently generating about 0.04 per unit of risk. If you would invest 47,040 in Zealand Pharma AS on August 29, 2024 and sell it today you would earn a total of 25,260 from holding Zealand Pharma AS or generate 53.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zealand Pharma AS vs. NKT AS
Performance |
| Timeline |
| Zealand Pharma AS |
| NKT AS |
Zealand Pharma and NKT AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zealand Pharma and NKT AS
The main advantage of trading using opposite Zealand Pharma and NKT AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zealand Pharma position performs unexpectedly, NKT 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 NKT AS will offset losses from the drop in NKT AS's long position.| Zealand Pharma vs. Bavarian Nordic | Zealand Pharma vs. Ambu AS | Zealand Pharma vs. Genmab AS | Zealand Pharma vs. ALK Abell AS |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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