Correlation Between Novartis and Amgen
Can any of the company-specific risk be diversified away by investing in both Novartis and Amgen 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 Amgen 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 Amgen Inc, you can compare the effects of market volatilities on Novartis and Amgen 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 Amgen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Amgen.
Diversification Opportunities for Novartis and Amgen
Almost no diversification
The 3 months correlation between Novartis and Amgen is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG ADR and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc 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 Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of Novartis i.e., Novartis and Amgen go up and down completely randomly.
Pair Corralation between Novartis and Amgen
Considering the 90-day investment horizon Novartis is expected to generate 6.98 times less return on investment than Amgen. But when comparing it to its historical volatility, Novartis AG ADR is 1.38 times less risky than Amgen. It trades about 0.03 of its potential returns per unit of risk. Amgen Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 26,338 in Amgen Inc on October 21, 2024 and sell it today you would earn a total of 873.00 from holding Amgen Inc or generate 3.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novartis AG ADR vs. Amgen Inc
Performance |
| Timeline |
| Novartis AG ADR |
| Amgen Inc |
Novartis and Amgen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novartis and Amgen
The main advantage of trading using opposite Novartis and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, Amgen 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 Amgen will offset losses from the drop in Amgen's long position.| Novartis vs. AstraZeneca PLC ADR | Novartis vs. GlaxoSmithKline PLC ADR | Novartis vs. Roche Holding Ltd | Novartis vs. Bristol Myers Squibb |
| Amgen vs. Agilent Technologies | Amgen vs. Equillium | Amgen vs. 23Andme Holding Co | Amgen vs. DiaMedica Therapeutics |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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