Correlation Between Novo Nordisk and Cell Source

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

Diversification Opportunities for Novo Nordisk and Cell Source

-0.32

Correlation Coefficient

Novo Nordisk  Cell Source

Very good diversification

The 3 months correlation between Novo and Cell is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Cell Source in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cell Source 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 Cell Source. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cell Source has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Cell Source go up and down completely randomly.

Pair Corralation between Novo Nordisk and Cell Source

Assuming the 90 days horizon Novo Nordisk is expected to generate 73.06 times less return on investment than Cell Source. But when comparing it to its historical volatility, Novo Nordisk AS is 27.33 times less risky than Cell Source. It trades about 0.03 of its potential returns per unit of risk. Cell Source is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  44.00  in Cell Source on October 5, 2024 and sell it today you would lose (9.00) from holding Cell Source or give up 20.45% of portfolio value over 90 days.

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

Novo Nordisk AS  vs.  Cell Source

Novo Nordisk AS

Risk-Adjusted Performance

0 of 100

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 conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Cell Source

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cell Source are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Cell Source unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novo Nordisk and Cell Source

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

The idea behind Novo Nordisk AS and Cell Source 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.