Correlation Between Amarin PLC and Novartis
Can any of the company-specific risk be diversified away by investing in both Amarin PLC 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 Amarin PLC and Novartis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amarin PLC and Novartis AG ADR, you can compare the effects of market volatilities on Amarin PLC 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 Amarin PLC with a short position of Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amarin PLC and Novartis.
Diversification Opportunities for Amarin PLC and Novartis
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amarin and Novartis is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Amarin PLC 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 Amarin PLC 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 Amarin PLC 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 Amarin PLC i.e., Amarin PLC and Novartis go up and down completely randomly.
Pair Corralation between Amarin PLC and Novartis
Given the investment horizon of 90 days Amarin PLC is expected to under-perform the Novartis. In addition to that, Amarin PLC is 4.16 times more volatile than Novartis AG ADR. It trades about -0.02 of its total potential returns per unit of risk. Novartis AG ADR is currently generating about 0.05 per unit of volatility. If you would invest 8,042 in Novartis AG ADR on August 28, 2024 and sell it today you would earn a total of 2,312 from holding Novartis AG ADR or generate 28.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amarin PLC vs. Novartis AG ADR
Performance |
| Timeline |
| Amarin PLC |
| Novartis AG ADR |
Amarin PLC and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amarin PLC and Novartis
The main advantage of trading using opposite Amarin PLC and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amarin PLC 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.| Amarin PLC vs. Scilex Holding | Amarin PLC vs. Biogen Inc | Amarin PLC vs. Gilead Sciences | Amarin PLC vs. AstraZeneca PLC ADR |
| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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