Correlation Between Novo Nordisk and Pharma Mar

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

Diversification Opportunities for Novo Nordisk and Pharma Mar

-0.87

Correlation Coefficient

Novo Nordisk  Pharma Mar

Pay attention - limited upside

The 3 months correlation between Novo and Pharma is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Pharma Mar SAU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharma Mar SAU 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 Pharma Mar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharma Mar SAU has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Pharma Mar go up and down completely randomly.

Pair Corralation between Novo Nordisk and Pharma Mar

Assuming the 90 days horizon Novo Nordisk AS is expected to under-perform the Pharma Mar. But the pink sheet apears to be less risky and, when comparing its historical volatility, Novo Nordisk AS is 1.94 times less risky than Pharma Mar. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Pharma Mar SAU is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,490  in Pharma Mar SAU on September 5, 2024 and sell it today you would earn a total of  3,010  from holding Pharma Mar SAU or generate 67.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Novo Nordisk AS  vs.  Pharma Mar SAU

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pharma Mar SAU

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pharma Mar SAU are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Pharma Mar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novo Nordisk and Pharma Mar

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

The idea behind Novo Nordisk AS and Pharma Mar SAU 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.