Correlation Between Grifols SA and Novartis
Can any of the company-specific risk be diversified away by investing in both Grifols SA 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 Grifols SA and Novartis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grifols SA ADR and Novartis AG, you can compare the effects of market volatilities on Grifols SA 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 Grifols SA with a short position of Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grifols SA and Novartis.
Diversification Opportunities for Grifols SA and Novartis
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Grifols and Novartis is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Grifols SA ADR and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG and Grifols SA 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 Grifols SA ADR 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 Grifols SA i.e., Grifols SA and Novartis go up and down completely randomly.
Pair Corralation between Grifols SA and Novartis
Given the investment horizon of 90 days Grifols SA is expected to generate 1.17 times less return on investment than Novartis. In addition to that, Grifols SA is 1.31 times more volatile than Novartis AG. It trades about 0.02 of its total potential returns per unit of risk. Novartis AG is currently generating about 0.03 per unit of volatility. If you would invest 8,047 in Novartis AG on August 27, 2024 and sell it today you would earn a total of 2,353 from holding Novartis AG or generate 29.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.52% |
| Values | Daily Returns |
Grifols SA ADR vs. Novartis AG
Performance |
| Timeline |
| Grifols SA ADR |
| Novartis AG |
Grifols SA and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grifols SA and Novartis
The main advantage of trading using opposite Grifols SA and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grifols SA 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.| Grifols SA vs. Novartis AG ADR | Grifols SA vs. AstraZeneca PLC ADR | Grifols SA vs. GlaxoSmithKline PLC ADR | Grifols SA vs. Roche Holding Ltd |
| Novartis vs. Roche Holding AG | Novartis vs. AstraZeneca PLC | Novartis vs. Roche Holding Ltd | Novartis vs. Sanofi ADR |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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