Correlation Between Novo Nordisk and Danske Invest

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

Diversification Opportunities for Novo Nordisk and Danske Invest

0.76

Correlation Coefficient

Novo Nordisk  Danske Invest

Poor diversification

The 3 months correlation between Novo and Danske is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Danske Invest Danmark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Invest Danmark 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 Danske Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Invest Danmark has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Danske Invest go up and down completely randomly.

Pair Corralation between Novo Nordisk and Danske Invest

Assuming the 90 days trading horizon Novo Nordisk AS is expected to generate 2.35 times more return on investment than Danske Invest. However, Novo Nordisk is 2.35 times more volatile than Danske Invest Danmark. It trades about -0.02 of its potential returns per unit of risk. Danske Invest Danmark is currently generating about -0.07 per unit of risk. If you would invest  77,150  in Novo Nordisk AS on August 31, 2024 and sell it today you would lose (1,420) from holding Novo Nordisk AS or give up 1.84% 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.  Danske Invest Danmark

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Danske Invest Danmark

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danske Invest Danmark has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Danske Invest is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Novo Nordisk and Danske Invest

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

The idea behind Novo Nordisk AS and Danske Invest Danmark 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.