Correlation Between Hvidbjerg Bank and Novo Nordisk

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

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

Diversification Opportunities for Hvidbjerg Bank and Novo Nordisk

0.84

Correlation Coefficient

Hvidbjerg Bank  Novo Nordisk

Very poor diversification

The 3 months correlation between Hvidbjerg and Novo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hvidbjerg Bank 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 Hvidbjerg Bank 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 Hvidbjerg Bank 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 Hvidbjerg Bank i.e., Hvidbjerg Bank and Novo Nordisk go up and down completely randomly.

Pair Corralation between Hvidbjerg Bank and Novo Nordisk

Assuming the 90 days trading horizon Hvidbjerg Bank is expected to under-perform the Novo Nordisk. But the stock apears to be less risky and, when comparing its historical volatility, Hvidbjerg Bank is 1.29 times less risky than Novo Nordisk. The stock trades about -0.04 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	100.0%
Values	Daily Returns

Hvidbjerg Bank  vs.  Novo Nordisk AS

Hvidbjerg Bank

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hvidbjerg Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Hvidbjerg Bank is not utilizing all of its potentials. The recent stock price disarray, 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 Hvidbjerg Bank and Novo Nordisk

The main advantage of trading using opposite Hvidbjerg Bank and Novo Nordisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hvidbjerg Bank 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 Hvidbjerg Bank 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.