Can any of the company-specific risk be diversified away by investing in both Novo Nordisk and ABIVAX Socit 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 ABIVAX Socit 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 ABIVAX Socit Anonyme, you can compare the effects of market volatilities on Novo Nordisk and ABIVAX Socit 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 ABIVAX Socit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Nordisk and ABIVAX Socit.
Diversification Opportunities for Novo Nordisk and ABIVAX Socit
The 3 months correlation between Novo and ABIVAX is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and ABIVAX Socit Anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABIVAX Socit Anonyme 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 ABIVAX Socit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABIVAX Socit Anonyme has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and ABIVAX Socit go up and down completely randomly.
Pair Corralation between Novo Nordisk and ABIVAX Socit
Considering the 90-day investment horizon Novo Nordisk is expected to generate 1.89 times less return on investment than ABIVAX Socit. But when comparing it to its historical volatility, Novo Nordisk AS is 3.82 times less risky than ABIVAX Socit. It trades about 0.11 of its potential returns per unit of risk. ABIVAX Socit Anonyme is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 790.00 in ABIVAX Socit Anonyme on September 5, 2023 and sell it today you would earn a total of 446.00 from holding ABIVAX Socit Anonyme or generate 56.46% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Novo Nordisk AS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Novo Nordisk may actually be approaching a critical reversion point that can send shares even higher in January 2024.
Over the last 90 days ABIVAX Socit Anonyme has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
The main advantage of trading using opposite Novo Nordisk and ABIVAX Socit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, ABIVAX Socit 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 ABIVAX Socit will offset losses from the drop in ABIVAX Socit's long position.
The idea behind Novo Nordisk AS and ABIVAX Socit Anonyme 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.
Check out your portfolio center.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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Macroaxis helps investors of all levels and skills to maximize the upside of all their holdings and minimize the risk
associated with market volatility, economic swings, and company-specific events. View terms and conditions