Correlation Between Formuepleje Globale and Novo Nordisk

Can any of the company-specific risk be diversified away by investing in both Formuepleje Globale 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 Formuepleje Globale and Novo Nordisk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Formuepleje Globale Aktier and Novo Nordisk AS, you can compare the effects of market volatilities on Formuepleje Globale 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 Formuepleje Globale with a short position of Novo Nordisk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formuepleje Globale and Novo Nordisk.

Diversification Opportunities for Formuepleje Globale and Novo Nordisk

0.88

Correlation Coefficient

Formuepleje Globale  Novo Nordisk

Very poor diversification

The 3 months correlation between Formuepleje and Novo is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Formuepleje Globale Aktier 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 Formuepleje Globale 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 Formuepleje Globale Aktier 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 Formuepleje Globale i.e., Formuepleje Globale and Novo Nordisk go up and down completely randomly.

Pair Corralation between Formuepleje Globale and Novo Nordisk

Assuming the 90 days trading horizon Formuepleje Globale Aktier is expected to under-perform the Novo Nordisk. But the stock apears to be less risky and, when comparing its historical volatility, Formuepleje Globale Aktier is 1.95 times less risky than Novo Nordisk. The stock trades about -0.12 of its potential returns per unit of risk. The Novo Nordisk AS is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  86,710  in Novo Nordisk AS on January 30, 2024 and sell it today you would earn a total of  1,950  from holding Novo Nordisk AS or generate 2.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.0%
Values	Daily Returns

Formuepleje Globale Aktier  vs.  Novo Nordisk AS

Formuepleje Globale

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Formuepleje Globale Aktier are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Formuepleje Globale is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Novo Nordisk AS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Novo Nordisk AS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Novo Nordisk sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Formuepleje Globale and Novo Nordisk

The main advantage of trading using opposite Formuepleje Globale and Novo Nordisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formuepleje Globale 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 Formuepleje Globale Aktier 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.