Correlation Between Banco Ita and Novartis

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

By analyzing existing cross correlation between Banco Ita Chile and Novartis AG ADR, you can compare the effects of market volatilities on Banco Ita 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 Banco Ita with a short position of Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Ita and Novartis.

Diversification Opportunities for Banco Ita and Novartis

0.0

Correlation Coefficient

Banco Ita  Novartis

Pay attention - limited upside

The 3 months correlation between Banco and Novartis is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Banco Ita Chile and Novartis AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG ADR and Banco Ita 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 Banco Ita Chile 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 ADR has no effect on the direction of Banco Ita i.e., Banco Ita and Novartis go up and down completely randomly.

Pair Corralation between Banco Ita and Novartis

If you would invest  9,395  in Novartis AG ADR on December 28, 2024 and sell it today you would earn a total of  1,862  from holding Novartis AG ADR or generate 19.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Banco Ita Chile  vs.  Novartis AG ADR

Banco Ita Chile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Banco Ita Chile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Banco Ita is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Novartis AG ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Novartis AG ADR are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Novartis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Ita and Novartis

The main advantage of trading using opposite Banco Ita and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Ita 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.

The idea behind Banco Ita Chile and Novartis AG ADR 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.