Correlation Between Novo Nordisk and Nascent Biotech

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

Diversification Opportunities for Novo Nordisk and Nascent Biotech

0.46

Correlation Coefficient

Novo Nordisk  Nascent Biotech

Very weak diversification

The 3 months correlation between Novo and Nascent is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Nascent Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nascent 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 Nascent Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nascent Biotech has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Nascent Biotech go up and down completely randomly.

Pair Corralation between Novo Nordisk and Nascent Biotech

Considering the 90-day investment horizon Novo Nordisk AS is expected to under-perform the Nascent Biotech. But the stock apears to be less risky and, when comparing its historical volatility, Novo Nordisk AS is 30.07 times less risky than Nascent Biotech. The stock trades about -0.08 of its potential returns per unit of risk. The Nascent Biotech is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5.06  in Nascent Biotech on December 25, 2024 and sell it today you would lose (4.61) from holding Nascent Biotech or give up 91.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

Novo Nordisk AS  vs.  Nascent Biotech

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. 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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Nascent Biotech

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nascent Biotech are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Nascent Biotech displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novo Nordisk and Nascent Biotech

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

The idea behind Novo Nordisk AS and Nascent 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.

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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 CEOs Directory module to screen CEOs from public companies around the world.