Correlation Between Novartis and Frequency Therapeutics
Can any of the company-specific risk be diversified away by investing in both Novartis and Frequency Therapeutics 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 Frequency Therapeutics 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 Frequency Therapeutics, you can compare the effects of market volatilities on Novartis and Frequency Therapeutics 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 Frequency Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Frequency Therapeutics.
Diversification Opportunities for Novartis and Frequency Therapeutics
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Novartis and Frequency is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG ADR and Frequency Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frequency Therapeutics 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 Frequency Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frequency Therapeutics has no effect on the direction of Novartis i.e., Novartis and Frequency Therapeutics go up and down completely randomly.
Pair Corralation between Novartis and Frequency Therapeutics
Considering the 90-day investment horizon Novartis AG ADR is expected to generate 0.16 times more return on investment than Frequency Therapeutics. However, Novartis AG ADR is 6.31 times less risky than Frequency Therapeutics. It trades about -0.07 of its potential returns per unit of risk. Frequency Therapeutics is currently generating about -0.18 per unit of risk. If you would invest 9,845 in Novartis AG ADR on October 22, 2024 and sell it today you would lose (92.00) from holding Novartis AG ADR or give up 0.93% 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. Frequency Therapeutics
Performance |
| Timeline |
| Novartis AG ADR |
| Frequency Therapeutics |
Novartis and Frequency Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novartis and Frequency Therapeutics
The main advantage of trading using opposite Novartis and Frequency Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, Frequency Therapeutics 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 Frequency Therapeutics will offset losses from the drop in Frequency Therapeutics' long position.The idea behind Novartis AG ADR and Frequency Therapeutics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Frequency Therapeutics vs. Fidus Investment Corp | Frequency Therapeutics vs. Cementos Pacasmayo SAA | Frequency Therapeutics vs. McDonalds | Frequency Therapeutics vs. Summit Materials |
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 CEOs Directory module to screen CEOs from public companies around the world.
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