Correlation Between Novartis and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Novartis and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Novartis and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Dow Jones.
Diversification Opportunities for Novartis and Dow Jones
Pay attention - limited upside
The 3 months correlation between Novartis and Dow is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG ADR and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Novartis i.e., Novartis and Dow Jones go up and down completely randomly.
Pair Corralation between Novartis and Dow Jones
Considering the 90-day investment horizon Novartis is expected to generate 1.74 times less return on investment than Dow Jones. In addition to that, Novartis is 1.56 times more volatile than Dow Jones Industrial. It trades about 0.04 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.11 per unit of volatility. If you would invest 3,428,864 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 1,044,793 from holding Dow Jones Industrial or generate 30.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novartis AG ADR vs. Dow Jones Industrial
Performance |
| Timeline |
Novartis and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Novartis AG ADR
Pair trading matchups for Novartis
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Novartis and Dow Jones
The main advantage of trading using opposite Novartis and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Novartis vs. AstraZeneca PLC ADR | Novartis vs. GlaxoSmithKline PLC ADR | Novartis vs. Roche Holding Ltd | Novartis vs. Bristol Myers Squibb |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |