Correlation Between Purple Biotech and Novo Nordisk

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

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

Diversification Opportunities for Purple Biotech and Novo Nordisk

0.29

Correlation Coefficient

Purple Biotech  Novo Nordisk

Modest diversification

The 3 months correlation between Purple and Novo is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Purple Biotech 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 Purple Biotech 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 Purple Biotech 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 Purple Biotech i.e., Purple Biotech and Novo Nordisk go up and down completely randomly.

Pair Corralation between Purple Biotech and Novo Nordisk

Given the investment horizon of 90 days Purple Biotech is expected to under-perform the Novo Nordisk. In addition to that, Purple Biotech is 5.18 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 0.08 per unit of volatility. If you would invest  13,389  in Novo Nordisk AS on March 14, 2024 and sell it today you would earn a total of  790.00  from holding Novo Nordisk AS or generate 5.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Purple Biotech  vs.  Novo Nordisk AS

Purple Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Purple Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Purple Biotech is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Novo Nordisk AS

Risk-Adjusted Performance

5 of 100

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. In spite of very weak basic indicators, Novo Nordisk may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Purple Biotech and Novo Nordisk

The main advantage of trading using opposite Purple Biotech and Novo Nordisk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Purple Biotech 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 Purple Biotech 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.