Correlation Between Chugai Pharmaceutical and Novartis
Can any of the company-specific risk be diversified away by investing in both Chugai Pharmaceutical 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 Chugai Pharmaceutical and Novartis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chugai Pharmaceutical Co and Novartis AG, you can compare the effects of market volatilities on Chugai Pharmaceutical 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 Chugai Pharmaceutical with a short position of Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chugai Pharmaceutical and Novartis.
Diversification Opportunities for Chugai Pharmaceutical and Novartis
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chugai and Novartis is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Chugai Pharmaceutical Co and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG and Chugai Pharmaceutical 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 Chugai Pharmaceutical Co 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 Chugai Pharmaceutical i.e., Chugai Pharmaceutical and Novartis go up and down completely randomly.
Pair Corralation between Chugai Pharmaceutical and Novartis
Assuming the 90 days horizon Chugai Pharmaceutical Co is expected to generate 1.19 times more return on investment than Novartis. However, Chugai Pharmaceutical is 1.19 times more volatile than Novartis AG. It trades about -0.1 of its potential returns per unit of risk. Novartis AG is currently generating about -0.13 per unit of risk. If you would invest 2,498 in Chugai Pharmaceutical Co on August 23, 2024 and sell it today you would lose (429.00) from holding Chugai Pharmaceutical Co or give up 17.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chugai Pharmaceutical Co vs. Novartis AG
Performance |
| Timeline |
| Chugai Pharmaceutical |
| Novartis AG |
Chugai Pharmaceutical and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chugai Pharmaceutical and Novartis
The main advantage of trading using opposite Chugai Pharmaceutical and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chugai Pharmaceutical 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.| Chugai Pharmaceutical vs. Ono Pharmaceutical Co | Chugai Pharmaceutical vs. GSK plc | Chugai Pharmaceutical vs. Grifols SA ADR | Chugai Pharmaceutical vs. Pfizer Inc |
| Novartis vs. Ono Pharmaceutical Co | Novartis vs. GSK plc | Novartis vs. Grifols SA ADR | Novartis vs. Pfizer Inc |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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