Correlation Between Novartis and Swiss Life
Can any of the company-specific risk be diversified away by investing in both Novartis and Swiss Life 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 Swiss Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novartis AG and Swiss Life Holding, you can compare the effects of market volatilities on Novartis and Swiss Life 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 Swiss Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Swiss Life.
Diversification Opportunities for Novartis and Swiss Life
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Novartis and Swiss is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG and Swiss Life Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Life Holding 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 Swiss Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Life Holding has no effect on the direction of Novartis i.e., Novartis and Swiss Life go up and down completely randomly.
Pair Corralation between Novartis and Swiss Life
Assuming the 90 days trading horizon Novartis AG is expected to under-perform the Swiss Life. In addition to that, Novartis is 1.42 times more volatile than Swiss Life Holding. It trades about -0.29 of its total potential returns per unit of risk. Swiss Life Holding is currently generating about 0.08 per unit of volatility. If you would invest 71,520 in Swiss Life Holding on August 28, 2024 and sell it today you would earn a total of 1,020 from holding Swiss Life Holding or generate 1.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novartis AG vs. Swiss Life Holding
Performance |
| Timeline |
| Novartis AG |
| Swiss Life Holding |
Novartis and Swiss Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novartis and Swiss Life
The main advantage of trading using opposite Novartis and Swiss Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, Swiss Life 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 Swiss Life will offset losses from the drop in Swiss Life's long position.| Novartis vs. Roche Holding AG | Novartis vs. Nestl SA | Novartis vs. Zurich Insurance Group | Novartis vs. Swiss Re AG |
| Swiss Life vs. Helvetia Holding AG | Swiss Life vs. Swisscom AG | Swiss Life vs. Zurich Insurance Group | Swiss Life vs. Adecco Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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