Correlation Between Novo Nordisk and LOréal SA
Can any of the company-specific risk be diversified away by investing in both Novo Nordisk and LOréal SA 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 LOréal SA 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 LOral SA, you can compare the effects of market volatilities on Novo Nordisk and LOréal SA 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 LOréal SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novo Nordisk and LOréal SA.
Diversification Opportunities for Novo Nordisk and LOréal SA
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Novo and LOréal is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Novo Nordisk AS and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOréal SA 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 LOréal SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOréal SA has no effect on the direction of Novo Nordisk i.e., Novo Nordisk and LOréal SA go up and down completely randomly.
Pair Corralation between Novo Nordisk and LOréal SA
Assuming the 90 days horizon Novo Nordisk AS is expected to under-perform the LOréal SA. In addition to that, Novo Nordisk is 1.71 times more volatile than LOral SA. It trades about -0.1 of its total potential returns per unit of risk. LOral SA is currently generating about 0.03 per unit of volatility. If you would invest 42,956 in LOral SA on May 7, 2025 and sell it today you would earn a total of 1,444 from holding LOral SA or generate 3.36% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Novo Nordisk AS vs. LOral SA
Performance |
Timeline |
Novo Nordisk AS |
LOréal SA |
Novo Nordisk and LOréal SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Novo Nordisk and LOréal SA
The main advantage of trading using opposite Novo Nordisk and LOréal SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novo Nordisk position performs unexpectedly, LOréal SA 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 LOréal SA will offset losses from the drop in LOréal SA's long position.Novo Nordisk vs. Ventyx Biosciences | Novo Nordisk vs. CSL Limited | Novo Nordisk vs. CSL | Novo Nordisk vs. Novartis AG |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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