Correlation Between Novo Nordisk and Ventyx Biosciences

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

Diversification Opportunities for Novo Nordisk and Ventyx Biosciences

0.27

Correlation Coefficient

Novo Nordisk  Ventyx Biosciences

Modest diversification

The 3 months correlation between Novo and Ventyx is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Ventyx Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ventyx Biosciences 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 Ventyx Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ventyx Biosciences has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Ventyx Biosciences go up and down completely randomly.

Pair Corralation between Novo Nordisk and Ventyx Biosciences

Assuming the 90 days horizon Novo Nordisk AS is expected to generate 0.49 times more return on investment than Ventyx Biosciences. However, Novo Nordisk AS is 2.03 times less risky than Ventyx Biosciences. It trades about 0.04 of its potential returns per unit of risk. Ventyx Biosciences is currently generating about 0.0 per unit of risk. If you would invest  8,663  in Novo Nordisk AS on October 27, 2024 and sell it today you would earn a total of  138.00  from holding Novo Nordisk AS or generate 1.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Novo Nordisk AS  vs.  Ventyx Biosciences

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.

Ventyx Biosciences

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ventyx Biosciences are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Ventyx Biosciences may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Novo Nordisk and Ventyx Biosciences

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

The idea behind Novo Nordisk AS and Ventyx Biosciences 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.