Correlation Between Novo Nordisk and Vaxcyte

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

Diversification Opportunities for Novo Nordisk and Vaxcyte

0.79

Correlation Coefficient

Novo Nordisk  Vaxcyte

Poor diversification

The 3 months correlation between Novo and Vaxcyte is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Vaxcyte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaxcyte 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 Vaxcyte. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaxcyte has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Vaxcyte go up and down completely randomly.

Pair Corralation between Novo Nordisk and Vaxcyte

Assuming the 90 days horizon Novo Nordisk is expected to generate 1.99 times less return on investment than Vaxcyte. But when comparing it to its historical volatility, Novo Nordisk AS is 1.22 times less risky than Vaxcyte. It trades about 0.03 of its potential returns per unit of risk. Vaxcyte is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,667  in Vaxcyte on October 9, 2024 and sell it today you would earn a total of  4,033  from holding Vaxcyte or generate 86.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Novo Nordisk AS  vs.  Vaxcyte

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.

Vaxcyte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vaxcyte has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Novo Nordisk and Vaxcyte

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

The idea behind Novo Nordisk AS and Vaxcyte 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 Global Correlations module to find global opportunities by holding instruments from different markets.