Correlation Between Scilex Holding and Novartis
Can any of the company-specific risk be diversified away by investing in both Scilex Holding 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 Scilex Holding and Novartis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scilex Holding and Novartis AG, you can compare the effects of market volatilities on Scilex Holding 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 Scilex Holding with a short position of Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scilex Holding and Novartis.
Diversification Opportunities for Scilex Holding and Novartis
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Scilex and Novartis is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Scilex Holding and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG and Scilex Holding 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 Scilex Holding 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 has no effect on the direction of Scilex Holding i.e., Scilex Holding and Novartis go up and down completely randomly.
Pair Corralation between Scilex Holding and Novartis
Given the investment horizon of 90 days Scilex Holding is expected to under-perform the Novartis. In addition to that, Scilex Holding is 3.39 times more volatile than Novartis AG. It trades about -0.03 of its total potential returns per unit of risk. Novartis AG is currently generating about 0.01 per unit of volatility. If you would invest 10,094 in Novartis AG on August 29, 2024 and sell it today you would earn a total of 149.00 from holding Novartis AG or generate 1.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 88.04% |
| Values | Daily Returns |
Scilex Holding vs. Novartis AG
Performance |
| Timeline |
| Scilex Holding |
| Novartis AG |
Scilex Holding and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scilex Holding and Novartis
The main advantage of trading using opposite Scilex Holding and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scilex Holding 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.| Scilex Holding vs. AstraZeneca PLC ADR | Scilex Holding vs. Gilead Sciences | Scilex Holding vs. Bristol Myers Squibb | Scilex Holding vs. Amgen Inc |
| Novartis vs. Sanofi ADR | Novartis vs. Bristol Myers Squibb | Novartis vs. AstraZeneca PLC ADR | Novartis vs. Gilead Sciences |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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