Correlation Between Novo Nordisk and Fast Ejendom

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

Diversification Opportunities for Novo Nordisk and Fast Ejendom

-0.2

Correlation Coefficient

Novo Nordisk  Fast Ejendom

Good diversification

The 3 months correlation between Novo and Fast is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Fast Ejendom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Ejendom 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 Fast Ejendom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Ejendom has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Fast Ejendom go up and down completely randomly.

Pair Corralation between Novo Nordisk and Fast Ejendom

Assuming the 90 days trading horizon Novo Nordisk AS is expected to under-perform the Fast Ejendom. In addition to that, Novo Nordisk is 1.95 times more volatile than Fast Ejendom. It trades about -0.07 of its total potential returns per unit of risk. Fast Ejendom is currently generating about 0.13 per unit of volatility. If you would invest  11,700  in Fast Ejendom on December 3, 2024 and sell it today you would earn a total of  1,700  from holding Fast Ejendom or generate 14.53% 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.  Fast Ejendom

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.

Fast Ejendom

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Ejendom are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Fast Ejendom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novo Nordisk and Fast Ejendom

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

The idea behind Novo Nordisk AS and Fast Ejendom 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.