Correlation Between Editas Medicine and Novo Nordisk

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Can any of the company-specific risk be diversified away by investing in both Editas Medicine and Novo Nordisk 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 Editas Medicine and Novo Nordisk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Editas Medicine and Novo Nordisk AS, you can compare the effects of market volatilities on Editas Medicine and Novo Nordisk 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 Editas Medicine with a short position of Novo Nordisk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Editas Medicine and Novo Nordisk.

Diversification Opportunities for Editas Medicine and Novo Nordisk

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between Editas and Novo is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Editas Medicine and Novo Nordisk AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novo Nordisk AS and Editas Medicine 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 Editas Medicine are associated (or correlated) with Novo Nordisk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novo Nordisk AS has no effect on the direction of Editas Medicine i.e., Editas Medicine and Novo Nordisk go up and down completely randomly.

Pair Corralation between Editas Medicine and Novo Nordisk

Given the investment horizon of 90 days Editas Medicine is expected to under-perform the Novo Nordisk. In addition to that, Editas Medicine is 2.54 times more volatile than Novo Nordisk AS. It trades about -0.01 of its total potential returns per unit of risk. Novo Nordisk AS is currently generating about 0.09 per unit of volatility. If you would invest  5,921  in Novo Nordisk AS on December 29, 2023 and sell it today you would earn a total of  6,884  from holding Novo Nordisk AS or generate 116.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Editas Medicine  vs.  Novo Nordisk AS

 Performance 
       Timeline  
Editas Medicine 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Editas Medicine has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Novo Nordisk AS 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Novo Nordisk AS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Novo Nordisk displayed solid returns over the last few months and may actually be approaching a breakup point.

Editas Medicine and Novo Nordisk Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Editas Medicine and Novo Nordisk

The main advantage of trading using opposite Editas Medicine and Novo Nordisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Editas Medicine position performs unexpectedly, Novo Nordisk 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 Novo Nordisk will offset losses from the drop in Novo Nordisk's long position.
The idea behind Editas Medicine and Novo Nordisk 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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