Correlation Between Swiss Life and Novartis
Can any of the company-specific risk be diversified away by investing in both Swiss Life 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 Swiss Life and Novartis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Swiss Life Holding and Novartis AG, you can compare the effects of market volatilities on Swiss Life 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 Swiss Life with a short position of Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Life and Novartis.
Diversification Opportunities for Swiss Life and Novartis
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Swiss and Novartis is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Life Holding and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG and Swiss Life 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 Swiss Life 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 Swiss Life i.e., Swiss Life and Novartis go up and down completely randomly.
Pair Corralation between Swiss Life and Novartis
Assuming the 90 days trading horizon Swiss Life Holding is expected to generate 1.0 times more return on investment than Novartis. However, Swiss Life is 1.0 times more volatile than Novartis AG. It trades about 0.09 of its potential returns per unit of risk. Novartis AG is currently generating about 0.03 per unit of risk. If you would invest 52,090 in Swiss Life Holding on August 27, 2024 and sell it today you would earn a total of 21,270 from holding Swiss Life Holding or generate 40.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Swiss Life Holding vs. Novartis AG
Performance |
| Timeline |
| Swiss Life Holding |
| Novartis AG |
Swiss Life and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swiss Life and Novartis
The main advantage of trading using opposite Swiss Life and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swiss Life 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.| Swiss Life vs. Helvetia Holding AG | Swiss Life vs. Swisscom AG | Swiss Life vs. Zurich Insurance Group | Swiss Life vs. Adecco Group AG |
| Novartis vs. Roche Holding AG | Novartis vs. Nestl SA | Novartis vs. Zurich Insurance Group | Novartis vs. Swiss Re 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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