Correlation Between Novo Nordisk and Ringkjoebing Landbobank

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

Diversification Opportunities for Novo Nordisk and Ringkjoebing Landbobank

0.42
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Novo and Ringkjoebing is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Ringkjoebing Landbobank AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ringkjoebing Landbobank 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 Ringkjoebing Landbobank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ringkjoebing Landbobank has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Ringkjoebing Landbobank go up and down completely randomly.

Pair Corralation between Novo Nordisk and Ringkjoebing Landbobank

Assuming the 90 days trading horizon Novo Nordisk AS is expected to generate 1.25 times more return on investment than Ringkjoebing Landbobank. However, Novo Nordisk is 1.25 times more volatile than Ringkjoebing Landbobank AS. It trades about 0.11 of its potential returns per unit of risk. Ringkjoebing Landbobank AS is currently generating about 0.06 per unit of risk. If you would invest  37,017  in Novo Nordisk AS on February 20, 2024 and sell it today you would earn a total of  53,313  from holding Novo Nordisk AS or generate 144.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Novo Nordisk AS  vs.  Ringkjoebing Landbobank AS

 Performance 
       Timeline  
Novo Nordisk AS 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Novo Nordisk AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Novo Nordisk may actually be approaching a critical reversion point that can send shares even higher in June 2024.
Ringkjoebing Landbobank 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Ringkjoebing Landbobank AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Ringkjoebing Landbobank is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Novo Nordisk and Ringkjoebing Landbobank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Novo Nordisk and Ringkjoebing Landbobank

The main advantage of trading using opposite Novo Nordisk and Ringkjoebing Landbobank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, Ringkjoebing Landbobank 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 Ringkjoebing Landbobank will offset losses from the drop in Ringkjoebing Landbobank's long position.
The idea behind Novo Nordisk AS and Ringkjoebing Landbobank 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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