Correlation Between Novo Nordisk and Pharming Group

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

Diversification Opportunities for Novo Nordisk and Pharming Group

0.28

Correlation Coefficient

Novo Nordisk  Pharming Group

Modest diversification

The 3 months correlation between Novo and Pharming is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Pharming Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharming Group NV 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 Pharming Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharming Group NV has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Pharming Group go up and down completely randomly.

Pair Corralation between Novo Nordisk and Pharming Group

Assuming the 90 days horizon Novo Nordisk AS is expected to under-perform the Pharming Group. In addition to that, Novo Nordisk is 1.07 times more volatile than Pharming Group NV. It trades about -0.11 of its total potential returns per unit of risk. Pharming Group NV is currently generating about -0.04 per unit of volatility. If you would invest  98.00  in Pharming Group NV on December 29, 2024 and sell it today you would lose (8.00) from holding Pharming Group NV or give up 8.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Novo Nordisk AS  vs.  Pharming Group NV

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.

Pharming Group NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pharming Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pharming Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Novo Nordisk and Pharming Group

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

The idea behind Novo Nordisk AS and Pharming Group NV 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.