Correlation Between Novartis and Scilex Holding
Can any of the company-specific risk be diversified away by investing in both Novartis and Scilex Holding 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 Scilex Holding 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 Scilex Holding, you can compare the effects of market volatilities on Novartis and Scilex Holding 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 Scilex Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Scilex Holding.
Diversification Opportunities for Novartis and Scilex Holding
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Novartis and Scilex is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG ADR and Scilex Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scilex Holding 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 Scilex Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scilex Holding has no effect on the direction of Novartis i.e., Novartis and Scilex Holding go up and down completely randomly.
Pair Corralation between Novartis and Scilex Holding
Considering the 90-day investment horizon Novartis AG ADR is expected to generate 0.14 times more return on investment than Scilex Holding. However, Novartis AG ADR is 7.08 times less risky than Scilex Holding. It trades about 0.03 of its potential returns per unit of risk. Scilex Holding is currently generating about -0.03 per unit of risk. If you would invest 9,562 in Novartis AG ADR on August 29, 2024 and sell it today you would earn a total of 819.00 from holding Novartis AG ADR or generate 8.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novartis AG ADR vs. Scilex Holding
Performance |
| Timeline |
| Novartis AG ADR |
| Scilex Holding |
Novartis and Scilex Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novartis and Scilex Holding
The main advantage of trading using opposite Novartis and Scilex Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, Scilex Holding 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 Scilex Holding will offset losses from the drop in Scilex Holding's long position.| Novartis vs. AstraZeneca PLC ADR | Novartis vs. GlaxoSmithKline PLC ADR | Novartis vs. Roche Holding Ltd | Novartis vs. Bristol Myers Squibb |
| Scilex Holding vs. AstraZeneca PLC ADR | Scilex Holding vs. Gilead Sciences | Scilex Holding vs. Bristol Myers Squibb | Scilex Holding vs. Amgen Inc |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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