Correlation Between Novo Nordisk and Djurslands Bank

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

Diversification Opportunities for Novo Nordisk and Djurslands Bank

-0.16

Correlation Coefficient

Novo Nordisk  Djurslands Bank

Good diversification

The 3 months correlation between Novo and Djurslands is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Djurslands Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Djurslands Bank 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 Djurslands Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Djurslands Bank has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Djurslands Bank go up and down completely randomly.

Pair Corralation between Novo Nordisk and Djurslands Bank

Assuming the 90 days trading horizon Novo Nordisk AS is expected to under-perform the Djurslands Bank. In addition to that, Novo Nordisk is 1.35 times more volatile than Djurslands Bank. It trades about -0.47 of its total potential returns per unit of risk. Djurslands Bank is currently generating about -0.06 per unit of volatility. If you would invest  66,500  in Djurslands Bank on December 29, 2024 and sell it today you would lose (2,000) from holding Djurslands Bank or give up 3.01% of portfolio value over 90 days.

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

Novo Nordisk AS  vs.  Djurslands Bank

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.

Djurslands Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Djurslands Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Djurslands Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novo Nordisk and Djurslands Bank

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

The idea behind Novo Nordisk AS and Djurslands Bank 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.