Correlation Between Astellas Pharma and Novartis
Can any of the company-specific risk be diversified away by investing in both Astellas Pharma and Novartis 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 Astellas Pharma and Novartis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Astellas Pharma and Novartis AG ADR, you can compare the effects of market volatilities on Astellas Pharma and Novartis 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 Astellas Pharma with a short position of Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Astellas Pharma and Novartis.
Diversification Opportunities for Astellas Pharma and Novartis
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Astellas and Novartis is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Astellas Pharma and Novartis AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG ADR and Astellas Pharma 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 Astellas Pharma are associated (or correlated) with Novartis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novartis AG ADR has no effect on the direction of Astellas Pharma i.e., Astellas Pharma and Novartis go up and down completely randomly.
Pair Corralation between Astellas Pharma and Novartis
Assuming the 90 days horizon Astellas Pharma is expected to generate 4.99 times more return on investment than Novartis. However, Astellas Pharma is 4.99 times more volatile than Novartis AG ADR. It trades about -0.03 of its potential returns per unit of risk. Novartis AG ADR is currently generating about -0.28 per unit of risk. If you would invest 1,105 in Astellas Pharma on August 30, 2024 and sell it today you would lose (45.00) from holding Astellas Pharma or give up 4.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Astellas Pharma vs. Novartis AG ADR
Performance |
| Timeline |
| Astellas Pharma |
| Novartis AG ADR |
Astellas Pharma and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Astellas Pharma and Novartis
The main advantage of trading using opposite Astellas Pharma and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astellas Pharma position performs unexpectedly, Novartis 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 Novartis will offset losses from the drop in Novartis' long position.| Astellas Pharma vs. Bristol Myers Squibb | Astellas Pharma vs. Bayer AG | Astellas Pharma vs. Chugai Pharmaceutical Co | Astellas Pharma vs. AstraZeneca PLC |
| Novartis vs. AstraZeneca PLC ADR | Novartis vs. GlaxoSmithKline PLC ADR | Novartis vs. Roche Holding Ltd | Novartis vs. Bristol Myers Squibb |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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