Correlation Between Novo Nordisk and BIONTECH

Can any of the company-specific risk be diversified away by investing in both Novo Nordisk and BIONTECH 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 BIONTECH 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 BIONTECH SE DRN, you can compare the effects of market volatilities on Novo Nordisk and BIONTECH 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 BIONTECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Nordisk and BIONTECH.

Diversification Opportunities for Novo Nordisk and BIONTECH

0.04

Correlation Coefficient

Novo Nordisk  BIONTECH

Significant diversification

The 3 months correlation between Novo and BIONTECH is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and BIONTECH SE DRN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIONTECH SE DRN 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 BIONTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIONTECH SE DRN has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and BIONTECH go up and down completely randomly.

Pair Corralation between Novo Nordisk and BIONTECH

Assuming the 90 days trading horizon Novo Nordisk AS is expected to under-perform the BIONTECH. In addition to that, Novo Nordisk is 1.19 times more volatile than BIONTECH SE DRN. It trades about -0.12 of its total potential returns per unit of risk. BIONTECH SE DRN is currently generating about 0.05 per unit of volatility. If you would invest  4,062  in BIONTECH SE DRN on September 24, 2024 and sell it today you would earn a total of  288.00  from holding BIONTECH SE DRN or generate 7.09% return on investment over 90 days.

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

Novo Nordisk AS  vs.  BIONTECH SE DRN

Novo Nordisk AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novo Nordisk AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

BIONTECH SE DRN

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BIONTECH SE DRN are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BIONTECH may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Novo Nordisk and BIONTECH

The main advantage of trading using opposite Novo Nordisk and BIONTECH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, BIONTECH 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 BIONTECH will offset losses from the drop in BIONTECH's long position.

The idea behind Novo Nordisk AS and BIONTECH SE DRN 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.