Correlation Between Novo Nordisk and Therapeutic Solutions

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

Diversification Opportunities for Novo Nordisk and Therapeutic Solutions

0.73

Correlation Coefficient

Novo Nordisk  Therapeutic Solutions

Poor diversification

The 3 months correlation between Novo and Therapeutic is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Therapeutic Solutions Internat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Therapeutic Solutions 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 Therapeutic Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Therapeutic Solutions has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Therapeutic Solutions go up and down completely randomly.

Pair Corralation between Novo Nordisk and Therapeutic Solutions

Considering the 90-day investment horizon Novo Nordisk AS is expected to under-perform the Therapeutic Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Novo Nordisk AS is 12.12 times less risky than Therapeutic Solutions. The stock trades about -0.18 of its potential returns per unit of risk. The Therapeutic Solutions International is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Therapeutic Solutions International on October 26, 2024 and sell it today you would earn a total of  0.01  from holding Therapeutic Solutions International or generate 50.0% return on investment over 90 days.

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

Novo Nordisk AS  vs.  Therapeutic Solutions Internat

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.

Therapeutic Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Therapeutic Solutions International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Therapeutic Solutions is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Novo Nordisk and Therapeutic Solutions

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

The idea behind Novo Nordisk AS and Therapeutic Solutions International 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.