Correlation Between Novo Nordisk and Fresenius Medical

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

Diversification Opportunities for Novo Nordisk and Fresenius Medical

-0.12

Correlation Coefficient

Novo Nordisk  Fresenius Medical

Good diversification

The 3 months correlation between Novo and Fresenius is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care 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 Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Fresenius Medical go up and down completely randomly.

Pair Corralation between Novo Nordisk and Fresenius Medical

Assuming the 90 days trading horizon Novo Nordisk AS is expected to under-perform the Fresenius Medical. But the stock apears to be less risky and, when comparing its historical volatility, Novo Nordisk AS is 1.06 times less risky than Fresenius Medical. The stock trades about -0.11 of its potential returns per unit of risk. The Fresenius Medical Care is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  10,945  in Fresenius Medical Care on December 25, 2024 and sell it today you would earn a total of  2,766  from holding Fresenius Medical Care or generate 25.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Novo Nordisk AS  vs.  Fresenius Medical Care

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Fresenius Medical Care

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius Medical Care are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Fresenius Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novo Nordisk and Fresenius Medical

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

The idea behind Novo Nordisk AS and Fresenius Medical Care 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.