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, 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
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Astellas and Novartis is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Astellas Pharma and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG 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 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 under-perform the Novartis. In addition to that, Astellas Pharma is 1.66 times more volatile than Novartis AG. It trades about -0.01 of its total potential returns per unit of risk. Novartis AG is currently generating about 0.02 per unit of volatility. If you would invest 9,795 in Novartis AG on August 27, 2024 and sell it today you would earn a total of 605.00 from holding Novartis AG or generate 6.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.3% |
| Values | Daily Returns |
Astellas Pharma vs. Novartis AG
Performance |
| Timeline |
| Astellas Pharma |
| Novartis AG |
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. Sanofi ADR | Astellas Pharma vs. Bristol Myers Squibb | Astellas Pharma vs. AstraZeneca PLC ADR | Astellas Pharma vs. Gilead Sciences |
| Novartis vs. Sanofi ADR | Novartis vs. Bristol Myers Squibb | Novartis vs. AstraZeneca PLC ADR | Novartis vs. Gilead Sciences |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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