Correlation Between Novo Nordisk and Relief Therapeutics

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

Diversification Opportunities for Novo Nordisk and Relief Therapeutics

0.35

Correlation Coefficient

Novo Nordisk  Relief Therapeutics

Weak diversification

The 3 months correlation between Novo and Relief is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Relief Therapeutics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relief Therapeutics 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 Relief Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relief Therapeutics has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Relief Therapeutics go up and down completely randomly.

Pair Corralation between Novo Nordisk and Relief Therapeutics

Assuming the 90 days horizon Novo Nordisk AS is expected to generate 0.68 times more return on investment than Relief Therapeutics. However, Novo Nordisk AS is 1.47 times less risky than Relief Therapeutics. It trades about -0.07 of its potential returns per unit of risk. Relief Therapeutics Holding is currently generating about -0.16 per unit of risk. If you would invest  8,663  in Novo Nordisk AS on December 25, 2024 and sell it today you would lose (1,281) from holding Novo Nordisk AS or give up 14.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Novo Nordisk AS  vs.  Relief Therapeutics Holding

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.

Relief Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Relief Therapeutics Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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.

Pair Trading with Novo Nordisk and Relief Therapeutics

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

The idea behind Novo Nordisk AS and Relief Therapeutics Holding 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.