Correlation Between Novartis and Zurich Insurance
Can any of the company-specific risk be diversified away by investing in both Novartis and Zurich Insurance 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 Zurich Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novartis AG and Zurich Insurance Group, you can compare the effects of market volatilities on Novartis and Zurich Insurance 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 Zurich Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Zurich Insurance.
Diversification Opportunities for Novartis and Zurich Insurance
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Novartis and Zurich is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG and Zurich Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurich Insurance 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 Zurich Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zurich Insurance has no effect on the direction of Novartis i.e., Novartis and Zurich Insurance go up and down completely randomly.
Pair Corralation between Novartis and Zurich Insurance
Assuming the 90 days trading horizon Novartis is expected to generate 1.29 times less return on investment than Zurich Insurance. In addition to that, Novartis is 1.19 times more volatile than Zurich Insurance Group. It trades about 0.05 of its total potential returns per unit of risk. Zurich Insurance Group is currently generating about 0.07 per unit of volatility. If you would invest 40,449 in Zurich Insurance Group on August 27, 2024 and sell it today you would earn a total of 14,851 from holding Zurich Insurance Group or generate 36.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novartis AG vs. Zurich Insurance Group
Performance |
| Timeline |
| Novartis AG |
| Zurich Insurance |
Novartis and Zurich Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novartis and Zurich Insurance
The main advantage of trading using opposite Novartis and Zurich Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, Zurich Insurance 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 Zurich Insurance will offset losses from the drop in Zurich Insurance's long position.| Novartis vs. Roche Holding AG | Novartis vs. Nestl SA | Novartis vs. Zurich Insurance Group | Novartis vs. Swiss Re AG |
| Zurich Insurance vs. Swiss Re AG | Zurich Insurance vs. Novartis AG | Zurich Insurance vs. Swiss Life Holding | Zurich Insurance vs. UBS 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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