Correlation Between Novartis and Novartis
Can any of the company-specific risk be diversified away by investing in both Novartis and Novartis 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 Novartis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novartis AG and Novartis AG ADR, you can compare the effects of market volatilities on Novartis and Novartis 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 Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Novartis.
Diversification Opportunities for Novartis and Novartis
Very poor diversification
The 3 months correlation between Novartis and Novartis is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG and Novartis AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG ADR 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 are associated (or correlated) with Novartis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novartis AG ADR has no effect on the direction of Novartis i.e., Novartis and Novartis go up and down completely randomly.
Pair Corralation between Novartis and Novartis
Assuming the 90 days horizon Novartis AG is expected to generate 2.0 times more return on investment than Novartis. However, Novartis is 2.0 times more volatile than Novartis AG ADR. It trades about 0.04 of its potential returns per unit of risk. Novartis AG ADR is currently generating about 0.06 per unit of risk. If you would invest 9,092 in Novartis AG on August 25, 2024 and sell it today you would earn a total of 1,308 from holding Novartis AG or generate 14.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 92.25% |
| Values | Daily Returns |
Novartis AG vs. Novartis AG ADR
Performance |
| Timeline |
| Novartis AG |
| Novartis AG ADR |
Novartis and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novartis and Novartis
The main advantage of trading using opposite Novartis and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, Novartis 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 Novartis will offset losses from the drop in Novartis' long position.| Novartis vs. Roche Holding AG | Novartis vs. AstraZeneca PLC | Novartis vs. Roche Holding Ltd | Novartis vs. Sanofi ADR |
| Novartis vs. AstraZeneca PLC ADR | Novartis vs. GlaxoSmithKline PLC ADR | Novartis vs. Roche Holding Ltd | Novartis vs. Bristol Myers Squibb |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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