Correlation Between Novo Nordisk and GB Sciences

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

Diversification Opportunities for Novo Nordisk and GB Sciences

0.23

Correlation Coefficient

Novo Nordisk  GB Sciences

Modest diversification

The 3 months correlation between Novo and GBLX is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and GB Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GB Sciences 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 GB Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GB Sciences has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and GB Sciences go up and down completely randomly.

Pair Corralation between Novo Nordisk and GB Sciences

Assuming the 90 days horizon Novo Nordisk AS is expected to under-perform the GB Sciences. But the pink sheet apears to be less risky and, when comparing its historical volatility, Novo Nordisk AS is 19.0 times less risky than GB Sciences. The pink sheet trades about -0.09 of its potential returns per unit of risk. The GB Sciences is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.42  in GB Sciences on December 26, 2024 and sell it today you would lose (0.39) from holding GB Sciences or give up 92.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Novo Nordisk AS  vs.  GB Sciences

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

GB Sciences

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GB Sciences are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, GB Sciences showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novo Nordisk and GB Sciences

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

The idea behind Novo Nordisk AS and GB Sciences 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.