Correlation Between Novartis and Astellas Pharma
Can any of the company-specific risk be diversified away by investing in both Novartis and Astellas Pharma 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 Astellas Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novartis AG ADR and Astellas Pharma, you can compare the effects of market volatilities on Novartis and Astellas Pharma 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 Astellas Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Astellas Pharma.
Diversification Opportunities for Novartis and Astellas Pharma
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Novartis and Astellas is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG ADR and Astellas Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astellas Pharma 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 ADR are associated (or correlated) with Astellas Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astellas Pharma has no effect on the direction of Novartis i.e., Novartis and Astellas Pharma go up and down completely randomly.
Pair Corralation between Novartis and Astellas Pharma
Considering the 90-day investment horizon Novartis AG ADR is expected to generate 0.32 times more return on investment than Astellas Pharma. However, Novartis AG ADR is 3.11 times less risky than Astellas Pharma. It trades about -0.31 of its potential returns per unit of risk. Astellas Pharma is currently generating about -0.23 per unit of risk. If you would invest 11,379 in Novartis AG ADR on August 26, 2024 and sell it today you would lose (951.00) from holding Novartis AG ADR or give up 8.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novartis AG ADR vs. Astellas Pharma
Performance |
| Timeline |
| Novartis AG ADR |
| Astellas Pharma |
Novartis and Astellas Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novartis and Astellas Pharma
The main advantage of trading using opposite Novartis and Astellas Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, Astellas Pharma 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 Astellas Pharma will offset losses from the drop in Astellas Pharma's long position.| Novartis vs. AstraZeneca PLC ADR | Novartis vs. GlaxoSmithKline PLC ADR | Novartis vs. Roche Holding Ltd | Novartis vs. Bristol Myers Squibb |
| Astellas Pharma vs. Sanofi ADR | Astellas Pharma vs. Bristol Myers Squibb | Astellas Pharma vs. AstraZeneca PLC ADR | Astellas Pharma vs. Gilead Sciences |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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