Correlation Between Novo Nordisk and Royal Unibrew

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

Diversification Opportunities for Novo Nordisk and Royal Unibrew

0.84

Correlation Coefficient

Novo Nordisk  Royal Unibrew

Very poor diversification

The 3 months correlation between Novo and Royal is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Royal Unibrew AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Unibrew AS 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 Royal Unibrew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Unibrew AS has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Royal Unibrew go up and down completely randomly.

Pair Corralation between Novo Nordisk and Royal Unibrew

Assuming the 90 days trading horizon Novo Nordisk AS is expected to under-perform the Royal Unibrew. In addition to that, Novo Nordisk is 2.75 times more volatile than Royal Unibrew AS. It trades about -0.14 of its total potential returns per unit of risk. Royal Unibrew AS is currently generating about -0.19 per unit of volatility. If you would invest  55,200  in Royal Unibrew AS on October 21, 2024 and sell it today you would lose (7,680) from holding Royal Unibrew AS or give up 13.91% of portfolio value over 90 days.

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

Novo Nordisk AS  vs.  Royal Unibrew AS

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

Royal Unibrew AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Unibrew AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Novo Nordisk and Royal Unibrew

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

The idea behind Novo Nordisk AS and Royal Unibrew AS 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.