Correlation Between Novo Nordisk and Formuepleje Limittellus

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

Diversification Opportunities for Novo Nordisk and Formuepleje Limittellus

-0.7

Correlation Coefficient

Novo Nordisk  Formuepleje Limittellus

Excellent diversification

The 3 months correlation between Novo and Formuepleje is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Formuepleje Limittellus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formuepleje Limittellus 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 Formuepleje Limittellus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formuepleje Limittellus has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Formuepleje Limittellus go up and down completely randomly.

Pair Corralation between Novo Nordisk and Formuepleje Limittellus

Assuming the 90 days trading horizon Novo Nordisk is expected to generate 1.21 times less return on investment than Formuepleje Limittellus. In addition to that, Novo Nordisk is 2.73 times more volatile than Formuepleje Limittellus. It trades about 0.08 of its total potential returns per unit of risk. Formuepleje Limittellus is currently generating about 0.28 per unit of volatility. If you would invest  28,068  in Formuepleje Limittellus on September 5, 2024 and sell it today you would earn a total of  1,522  from holding Formuepleje Limittellus or generate 5.42% return on investment over 90 days.

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

Novo Nordisk AS  vs.  Formuepleje Limittellus

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Formuepleje Limittellus

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Formuepleje Limittellus are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating forward indicators, Formuepleje Limittellus may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Novo Nordisk and Formuepleje Limittellus

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

The idea behind Novo Nordisk AS and Formuepleje Limittellus 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.