Correlation Between Dow Jones and Novartis
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Novartis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Novartis AG, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Novartis.
Diversification Opportunities for Dow Jones and Novartis
Good diversification
The 3 months correlation between Dow and Novartis is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Novartis go up and down completely randomly.
Pair Corralation between Dow Jones and Novartis
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.57 times more return on investment than Novartis. However, Dow Jones Industrial is 1.76 times less risky than Novartis. It trades about -0.13 of its potential returns per unit of risk. Novartis AG is currently generating about -0.24 per unit of risk. If you would invest 4,326,894 in Dow Jones Industrial on September 20, 2024 and sell it today you would lose (94,207) from holding Dow Jones Industrial or give up 2.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Novartis AG
Performance |
| Timeline |
Dow Jones and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Novartis AG
Pair trading matchups for Novartis
Pair Trading with Dow Jones and Novartis
The main advantage of trading using opposite Dow Jones and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Digi International | Dow Jones vs. Grupo Televisa SAB | Dow Jones vs. United Microelectronics | Dow Jones vs. Weibo Corp |
| Novartis vs. The Bank of | Novartis vs. UnitedHealth Group Incorporated | Novartis vs. Grupo Sports World | Novartis vs. Martin Marietta Materials |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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