Correlation Between Elma Electronic and Novartis
Can any of the company-specific risk be diversified away by investing in both Elma Electronic 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 Elma Electronic and Novartis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elma Electronic AG and Novartis AG, you can compare the effects of market volatilities on Elma Electronic 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 Elma Electronic with a short position of Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elma Electronic and Novartis.
Diversification Opportunities for Elma Electronic and Novartis
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Elma and Novartis is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Elma Electronic AG and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG and Elma Electronic 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 Elma Electronic AG 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 Elma Electronic i.e., Elma Electronic and Novartis go up and down completely randomly.
Pair Corralation between Elma Electronic and Novartis
Assuming the 90 days trading horizon Elma Electronic is expected to generate 93.31 times less return on investment than Novartis. But when comparing it to its historical volatility, Elma Electronic AG is 1.37 times less risky than Novartis. It trades about 0.0 of its potential returns per unit of risk. Novartis AG is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 8,768 in Novartis AG on October 23, 2024 and sell it today you would earn a total of 168.00 from holding Novartis AG or generate 1.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 43.75% |
| Values | Daily Returns |
Elma Electronic AG vs. Novartis AG
Performance |
| Timeline |
| Elma Electronic AG |
| Novartis AG |
Elma Electronic and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elma Electronic and Novartis
The main advantage of trading using opposite Elma Electronic and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elma Electronic 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.| Elma Electronic vs. Carlo Gavazzi Holding | Elma Electronic vs. Feintool International Holding | Elma Electronic vs. Graubuendner Kantonalbank | Elma Electronic vs. Also Holding AG |
| Novartis vs. Roche Holding AG | Novartis vs. Nestl SA | Novartis vs. Zurich Insurance Group | Novartis vs. Swiss Re AG |
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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