Correlation Between Novartis and Dimed SA

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

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

Diversification Opportunities for Novartis and Dimed SA

0.39

Correlation Coefficient

Novartis  Dimed SA

Weak diversification

The 3 months correlation between Novartis and Dimed is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG and Dimed SA Distribuidora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimed SA Distribuidora and Novartis 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 Novartis AG are associated (or correlated) with Dimed SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimed SA Distribuidora has no effect on the direction of Novartis i.e., Novartis and Dimed SA go up and down completely randomly.

Pair Corralation between Novartis and Dimed SA

Assuming the 90 days trading horizon Novartis AG is expected to under-perform the Dimed SA. In addition to that, Novartis is 1.25 times more volatile than Dimed SA Distribuidora. It trades about -0.06 of its total potential returns per unit of risk. Dimed SA Distribuidora is currently generating about -0.05 per unit of volatility. If you would invest  1,022  in Dimed SA Distribuidora on September 13, 2024 and sell it today you would lose (48.00) from holding Dimed SA Distribuidora or give up 4.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Novartis AG  vs.  Dimed SA Distribuidora

Novartis AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novartis AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Dimed SA Distribuidora

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimed SA Distribuidora has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dimed SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Novartis and Dimed SA

The main advantage of trading using opposite Novartis and Dimed SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, Dimed SA 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 Dimed SA will offset losses from the drop in Dimed SA's long position.

The idea behind Novartis AG and Dimed SA Distribuidora 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.