Correlation Between Novo Nordisk and Carlsberg

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

Diversification Opportunities for Novo Nordisk and Carlsberg

0.78

Correlation Coefficient

Novo Nordisk  Carlsberg

Poor diversification

The 3 months correlation between Novo and Carlsberg is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Carlsberg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg AS 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 Carlsberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg AS has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Carlsberg go up and down completely randomly.

Pair Corralation between Novo Nordisk and Carlsberg

Assuming the 90 days trading horizon Novo Nordisk AS is expected to generate 1.16 times more return on investment than Carlsberg. However, Novo Nordisk is 1.16 times more volatile than Carlsberg AS. It trades about -0.15 of its potential returns per unit of risk. Carlsberg AS is currently generating about -0.18 per unit of risk. If you would invest  92,740  in Novo Nordisk AS on September 3, 2024 and sell it today you would lose (17,010) from holding Novo Nordisk AS or give up 18.34% of portfolio value over 90 days.

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

Novo Nordisk AS  vs.  Carlsberg AS

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 unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Carlsberg AS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Novo Nordisk and Carlsberg

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

The idea behind Novo Nordisk AS and Carlsberg AS 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.