Correlation Between Novo Nordisk and Danish Aerospace

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

Diversification Opportunities for Novo Nordisk and Danish Aerospace

-0.46

Correlation Coefficient

Novo Nordisk  Danish Aerospace

Very good diversification

The 3 months correlation between Novo and Danish is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Danish Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danish Aerospace 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 Danish Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danish Aerospace has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Danish Aerospace go up and down completely randomly.

Pair Corralation between Novo Nordisk and Danish Aerospace

Assuming the 90 days trading horizon Novo Nordisk AS is expected to under-perform the Danish Aerospace. But the stock apears to be less risky and, when comparing its historical volatility, Novo Nordisk AS is 7.52 times less risky than Danish Aerospace. The stock trades about -0.08 of its potential returns per unit of risk. The Danish Aerospace is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  294.00  in Danish Aerospace on December 21, 2024 and sell it today you would earn a total of  886.00  from holding Danish Aerospace or generate 301.36% return on investment over 90 days.

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

Novo Nordisk AS  vs.  Danish Aerospace

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Danish Aerospace

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Danish Aerospace are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Danish Aerospace displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novo Nordisk and Danish Aerospace

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

The idea behind Novo Nordisk AS and Danish Aerospace 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.

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.