Correlation Between Deluxe and NOVARTIS

Can any of the company-specific risk be diversified away by investing in both Deluxe 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 Deluxe and NOVARTIS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Deluxe and NOVARTIS CAP P, you can compare the effects of market volatilities on Deluxe 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 Deluxe with a short position of NOVARTIS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deluxe and NOVARTIS.

Diversification Opportunities for Deluxe and NOVARTIS

-0.56

Correlation Coefficient

Deluxe  NOVARTIS

Excellent diversification

The 3 months correlation between Deluxe and NOVARTIS is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and NOVARTIS CAP P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVARTIS CAP P and Deluxe 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 Deluxe 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 CAP P has no effect on the direction of Deluxe i.e., Deluxe and NOVARTIS go up and down completely randomly.

Pair Corralation between Deluxe and NOVARTIS

Considering the 90-day investment horizon Deluxe is expected to generate 62.09 times less return on investment than NOVARTIS. In addition to that, Deluxe is 1.58 times more volatile than NOVARTIS CAP P. It trades about 0.0 of its total potential returns per unit of risk. NOVARTIS CAP P is currently generating about 0.24 per unit of volatility. If you would invest  8,918  in NOVARTIS CAP P on September 14, 2024 and sell it today you would earn a total of  369.00  from holding NOVARTIS CAP P or generate 4.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Deluxe  vs.  NOVARTIS CAP P

Deluxe

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

NOVARTIS CAP P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOVARTIS CAP P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NOVARTIS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deluxe and NOVARTIS

The main advantage of trading using opposite Deluxe and NOVARTIS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deluxe 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's long position.

The idea behind Deluxe and NOVARTIS CAP P pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.