Correlation Between Novo Nordisk and Zenith Capital

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

Diversification Opportunities for Novo Nordisk and Zenith Capital

0.73

Correlation Coefficient

Novo Nordisk  Zenith Capital

Poor diversification

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

Pair Corralation between Novo Nordisk and Zenith Capital

Considering the 90-day investment horizon Novo Nordisk is expected to generate 201.64 times less return on investment than Zenith Capital. But when comparing it to its historical volatility, Novo Nordisk AS is 49.95 times less risky than Zenith Capital. It trades about 0.03 of its potential returns per unit of risk. Zenith Capital Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Zenith Capital Corp on October 25, 2024 and sell it today you would lose (15.99) from holding Zenith Capital Corp or give up 99.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.4%
Values	Daily Returns

Novo Nordisk AS  vs.  Zenith Capital Corp

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.

Zenith Capital Corp

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zenith Capital Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Zenith Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novo Nordisk and Zenith Capital

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

The idea behind Novo Nordisk AS and Zenith Capital Corp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.