Correlation Between Novartis and Bayer AG
Can any of the company-specific risk be diversified away by investing in both Novartis and Bayer AG 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 Bayer AG 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 Bayer AG PK, you can compare the effects of market volatilities on Novartis and Bayer AG 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 Bayer AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Bayer AG.
Diversification Opportunities for Novartis and Bayer AG
Pay attention - limited upside
The 3 months correlation between Novartis and Bayer is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG ADR and Bayer AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG PK 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 Bayer AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayer AG PK has no effect on the direction of Novartis i.e., Novartis and Bayer AG go up and down completely randomly.
Pair Corralation between Novartis and Bayer AG
If you would invest 10,022 in Novartis AG ADR on November 9, 2024 and sell it today you would earn a total of 676.00 from holding Novartis AG ADR or generate 6.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Novartis AG ADR vs. Bayer AG PK
Performance |
| Timeline |
| Novartis AG ADR |
| Bayer AG PK |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Novartis and Bayer AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novartis and Bayer AG
The main advantage of trading using opposite Novartis and Bayer AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, Bayer AG 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 Bayer AG will offset losses from the drop in Bayer AG's long position.| Novartis vs. AstraZeneca PLC ADR | Novartis vs. GlaxoSmithKline PLC ADR | Novartis vs. Roche Holding Ltd | Novartis vs. Bristol Myers Squibb |
| Bayer AG vs. Novartis AG ADR | Bayer AG vs. Sanofi ADR | Bayer AG vs. AstraZeneca PLC ADR | Bayer AG vs. GlaxoSmithKline PLC ADR |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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