Correlation Between Clearside Biomedical and Novo Nordisk

Can any of the company-specific risk be diversified away by investing in both Clearside Biomedical and Novo Nordisk 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 Clearside Biomedical and Novo Nordisk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Clearside Biomedical and Novo Nordisk AS, you can compare the effects of market volatilities on Clearside Biomedical and Novo Nordisk 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 Clearside Biomedical with a short position of Novo Nordisk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearside Biomedical and Novo Nordisk.

Diversification Opportunities for Clearside Biomedical and Novo Nordisk

0.27

Correlation Coefficient

Clearside Biomedical  Novo Nordisk

Modest diversification

The 3 months correlation between Clearside and Novo is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Clearside Biomedical and Novo Nordisk AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novo Nordisk AS and Clearside Biomedical 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 Clearside Biomedical are associated (or correlated) with Novo Nordisk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novo Nordisk AS has no effect on the direction of Clearside Biomedical i.e., Clearside Biomedical and Novo Nordisk go up and down completely randomly.

Pair Corralation between Clearside Biomedical and Novo Nordisk

Assuming the 90 days trading horizon Clearside Biomedical is expected to under-perform the Novo Nordisk. But the stock apears to be less risky and, when comparing its historical volatility, Clearside Biomedical is 1.47 times less risky than Novo Nordisk. The stock trades about -0.09 of its potential returns per unit of risk. The Novo Nordisk AS is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  10,000  in Novo Nordisk AS on November 29, 2024 and sell it today you would lose (1,420) from holding Novo Nordisk AS or give up 14.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Clearside Biomedical  vs.  Novo Nordisk AS

Clearside Biomedical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clearside Biomedical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Novo Nordisk AS

Risk-Adjusted Performance

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Clearside Biomedical and Novo Nordisk

The main advantage of trading using opposite Clearside Biomedical and Novo Nordisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearside Biomedical position performs unexpectedly, Novo Nordisk 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 Novo Nordisk will offset losses from the drop in Novo Nordisk's long position.

The idea behind Clearside Biomedical and Novo Nordisk AS 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.