Correlation Between Novo Nordisk and Baudax BioInc

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

Diversification Opportunities for Novo Nordisk and Baudax BioInc

-0.76
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Novo and Baudax is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and Baudax BioInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baudax BioInc 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 Baudax BioInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baudax BioInc has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and Baudax BioInc go up and down completely randomly.

Pair Corralation between Novo Nordisk and Baudax BioInc

Considering the 90-day investment horizon Novo Nordisk AS is expected to generate 0.22 times more return on investment than Baudax BioInc. However, Novo Nordisk AS is 4.45 times less risky than Baudax BioInc. It trades about 0.1 of its potential returns per unit of risk. Baudax BioInc is currently generating about -0.08 per unit of risk. If you would invest  12,161  in Novo Nordisk AS on December 29, 2023 and sell it today you would earn a total of  644.00  from holding Novo Nordisk AS or generate 5.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

Novo Nordisk AS  vs.  Baudax BioInc

 Performance 
       Timeline  
Novo Nordisk AS 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Novo Nordisk AS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Novo Nordisk displayed solid returns over the last few months and may actually be approaching a breakup point.
Baudax BioInc 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Baudax BioInc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Baudax BioInc is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Novo Nordisk and Baudax BioInc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Novo Nordisk and Baudax BioInc

The main advantage of trading using opposite Novo Nordisk and Baudax BioInc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, Baudax BioInc 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 Baudax BioInc will offset losses from the drop in Baudax BioInc's long position.
The idea behind Novo Nordisk AS and Baudax BioInc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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