Correlation Between Novo Nordisk and Genscript Biotech

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

Diversification Opportunities for Novo Nordisk and Genscript Biotech

0.54

Correlation Coefficient

Novo Nordisk  Genscript Biotech

Very weak diversification

The 3 months correlation between Novo and Genscript is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Genscript Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genscript Biotech 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 Genscript Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genscript Biotech has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Genscript Biotech go up and down completely randomly.

Pair Corralation between Novo Nordisk and Genscript Biotech

Considering the 90-day investment horizon Novo Nordisk AS is expected to under-perform the Genscript Biotech. In addition to that, Novo Nordisk is 1.06 times more volatile than Genscript Biotech. It trades about -0.29 of its total potential returns per unit of risk. Genscript Biotech is currently generating about 0.03 per unit of volatility. If you would invest  126.00  in Genscript Biotech on October 9, 2024 and sell it today you would earn a total of  1.00  from holding Genscript Biotech or generate 0.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Novo Nordisk AS  vs.  Genscript Biotech

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. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Genscript Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genscript Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Novo Nordisk and Genscript Biotech

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

The idea behind Novo Nordisk AS and Genscript Biotech 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .