Correlation Between Swiss Re and Novartis
Can any of the company-specific risk be diversified away by investing in both Swiss Re 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 Re and Novartis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Swiss Re AG and Novartis AG, you can compare the effects of market volatilities on Swiss Re 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 Re with a short position of Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Re and Novartis.
Diversification Opportunities for Swiss Re and Novartis
Very good diversification
The 3 months correlation between Swiss and Novartis is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Re AG and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG and Swiss Re 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 Re 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 has no effect on the direction of Swiss Re i.e., Swiss Re and Novartis go up and down completely randomly.
Pair Corralation between Swiss Re and Novartis
Assuming the 90 days trading horizon Swiss Re AG is expected to generate 1.63 times more return on investment than Novartis. However, Swiss Re is 1.63 times more volatile than Novartis AG. It trades about 0.31 of its potential returns per unit of risk. Novartis AG is currently generating about -0.28 per unit of risk. If you would invest 11,185 in Swiss Re AG on August 24, 2024 and sell it today you would earn a total of 1,535 from holding Swiss Re AG or generate 13.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Swiss Re AG vs. Novartis AG
Performance |
| Timeline |
| Swiss Re AG |
| Novartis AG |
Swiss Re and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swiss Re and Novartis
The main advantage of trading using opposite Swiss Re and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swiss Re 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 Re vs. Zurich Insurance Group | Swiss Re vs. Swiss Life Holding | Swiss Re vs. Novartis AG | Swiss Re vs. UBS 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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