Correlation Between Novartis and Otsuka Holdings
Can any of the company-specific risk be diversified away by investing in both Novartis and Otsuka Holdings 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 Otsuka Holdings 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 Otsuka Holdings Co, you can compare the effects of market volatilities on Novartis and Otsuka Holdings 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 Otsuka Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Otsuka Holdings.
Diversification Opportunities for Novartis and Otsuka Holdings
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Novartis and Otsuka is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG ADR and Otsuka Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otsuka Holdings 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 Otsuka Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otsuka Holdings has no effect on the direction of Novartis i.e., Novartis and Otsuka Holdings go up and down completely randomly.
Pair Corralation between Novartis and Otsuka Holdings
Considering the 90-day investment horizon Novartis AG ADR is expected to generate 0.52 times more return on investment than Otsuka Holdings. However, Novartis AG ADR is 1.94 times less risky than Otsuka Holdings. It trades about -0.25 of its potential returns per unit of risk. Otsuka Holdings Co is currently generating about -0.13 per unit of risk. If you would invest 10,991 in Novartis AG ADR on August 31, 2024 and sell it today you would lose (504.00) from holding Novartis AG ADR or give up 4.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novartis AG ADR vs. Otsuka Holdings Co
Performance |
| Timeline |
| Novartis AG ADR |
| Otsuka Holdings |
Novartis and Otsuka Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novartis and Otsuka Holdings
The main advantage of trading using opposite Novartis and Otsuka Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, Otsuka Holdings 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 Otsuka Holdings will offset losses from the drop in Otsuka Holdings' long position.| Novartis vs. AstraZeneca PLC ADR | Novartis vs. GlaxoSmithKline PLC ADR | Novartis vs. Roche Holding Ltd | Novartis vs. Bristol Myers Squibb |
| Otsuka Holdings vs. Pfizer Inc | Otsuka Holdings vs. Astellas Pharma | Otsuka Holdings vs. Bristol Myers Squibb | Otsuka Holdings vs. Bayer AG |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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