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

-0.23

Correlation Coefficient

Novo Nordisk  Carlsberg

Very good diversification

The 3 months correlation between Novo and Carlsberg is -0.23. 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 under-perform the Carlsberg. In addition to that, Novo Nordisk is 2.17 times more volatile than Carlsberg AS. It trades about -0.05 of its total potential returns per unit of risk. Carlsberg AS is currently generating about 0.21 per unit of volatility. If you would invest  72,680  in Carlsberg AS on November 29, 2024 and sell it today you would earn a total of  16,440  from holding Carlsberg AS or generate 22.62% return on investment over 90 days.

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

Novo Nordisk AS  vs.  Carlsberg AS

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

Carlsberg AS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carlsberg AS are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Carlsberg sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Transaction History module to view history of all your transactions and understand their impact on performance.