Correlation Between Novo Nordisk and GN Store

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

Diversification Opportunities for Novo Nordisk and GN Store

0.85

Correlation Coefficient

Novo Nordisk  GN Store

Very poor diversification

The 3 months correlation between Novo and GN Store is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and GN Store Nord in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GN Store Nord 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 GN Store. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GN Store Nord has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and GN Store go up and down completely randomly.

Pair Corralation between Novo Nordisk and GN Store

Assuming the 90 days trading horizon Novo Nordisk AS is expected to under-perform the GN Store. But the stock apears to be less risky and, when comparing its historical volatility, Novo Nordisk AS is 1.07 times less risky than GN Store. The stock trades about -0.16 of its potential returns per unit of risk. The GN Store Nord is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  15,420  in GN Store Nord on August 31, 2024 and sell it today you would lose (2,030) from holding GN Store Nord or give up 13.16% of portfolio value over 90 days.

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

Novo Nordisk AS  vs.  GN Store Nord

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 unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

GN Store Nord

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GN Store Nord has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Novo Nordisk and GN Store

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

The idea behind Novo Nordisk AS and GN Store Nord 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 Global Correlations module to find global opportunities by holding instruments from different markets.