Correlation Between Novartis and United States
Can any of the company-specific risk be diversified away by investing in both Novartis and United States 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 United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novartis AG and United States Steel, you can compare the effects of market volatilities on Novartis and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and United States.
Diversification Opportunities for Novartis and United States
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Novartis and United is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Novartis i.e., Novartis and United States go up and down completely randomly.
Pair Corralation between Novartis and United States
Assuming the 90 days trading horizon Novartis AG is expected to generate 0.44 times more return on investment than United States. However, Novartis AG is 2.27 times less risky than United States. It trades about -0.3 of its potential returns per unit of risk. United States Steel is currently generating about -0.39 per unit of risk. If you would invest 213,850 in Novartis AG on September 24, 2024 and sell it today you would lose (17,850) from holding Novartis AG or give up 8.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
Novartis AG vs. United States Steel
Performance |
| Timeline |
| Novartis AG |
| United States Steel |
Novartis and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novartis and United States
The main advantage of trading using opposite Novartis and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.| Novartis vs. United States Steel | Novartis vs. Cognizant Technology Solutions | Novartis vs. McEwen Mining | Novartis vs. Grupo Carso SAB |
| United States vs. Grupo Sports World | United States vs. McEwen Mining | United States vs. FIBRA Storage | United States vs. Capital One Financial |
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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