Correlation Between Novartis and Lonza Group
Can any of the company-specific risk be diversified away by investing in both Novartis and Lonza Group 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 Novartis and Lonza Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novartis AG and Lonza Group AG, you can compare the effects of market volatilities on Novartis and Lonza Group 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 Novartis with a short position of Lonza Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Lonza Group.
Diversification Opportunities for Novartis and Lonza Group
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Novartis and Lonza is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG and Lonza Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonza Group AG and Novartis 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 Novartis AG are associated (or correlated) with Lonza Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonza Group AG has no effect on the direction of Novartis i.e., Novartis and Lonza Group go up and down completely randomly.
Pair Corralation between Novartis and Lonza Group
Assuming the 90 days trading horizon Novartis AG is expected to generate 1.06 times more return on investment than Lonza Group. However, Novartis is 1.06 times more volatile than Lonza Group AG. It trades about 0.16 of its potential returns per unit of risk. Lonza Group AG is currently generating about -0.09 per unit of risk. If you would invest 9,244 in Novartis AG on November 29, 2024 and sell it today you would earn a total of 459.00 from holding Novartis AG or generate 4.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novartis AG vs. Lonza Group AG
Performance |
| Timeline |
| Novartis AG |
| Lonza Group AG |
Novartis and Lonza Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novartis and Lonza Group
The main advantage of trading using opposite Novartis and Lonza Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, Lonza Group 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 Lonza Group will offset losses from the drop in Lonza Group's long position.| Novartis vs. Roche Holding AG | Novartis vs. Nestl SA | Novartis vs. Zurich Insurance Group | Novartis vs. Swiss Re AG |
| Lonza Group vs. Sika AG | Lonza Group vs. Givaudan SA | Lonza Group vs. Geberit AG | Lonza Group vs. Swiss Life Holding |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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