Correlation Between Novartis and Banque Cantonale

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

By analyzing existing cross correlation between Novartis AG and Banque Cantonale, you can compare the effects of market volatilities on Novartis and Banque Cantonale 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 Banque Cantonale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Banque Cantonale.

Diversification Opportunities for Novartis and Banque Cantonale

0.72

Correlation Coefficient

Novartis  Banque Cantonale

Poor diversification

The 3 months correlation between Novartis and Banque is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG and Banque Cantonale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banque Cantonale 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 Banque Cantonale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banque Cantonale has no effect on the direction of Novartis i.e., Novartis and Banque Cantonale go up and down completely randomly.

Pair Corralation between Novartis and Banque Cantonale

Assuming the 90 days trading horizon Novartis is expected to generate 1.76 times less return on investment than Banque Cantonale. But when comparing it to its historical volatility, Novartis AG is 1.62 times less risky than Banque Cantonale. It trades about 0.08 of its potential returns per unit of risk. Banque Cantonale is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,730  in Banque Cantonale on November 19, 2024 and sell it today you would earn a total of  710.00  from holding Banque Cantonale or generate 8.13% return on investment over 90 days.

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

Novartis AG  vs.  Banque Cantonale

Novartis AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Novartis AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Novartis is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Banque Cantonale

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banque Cantonale are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Banque Cantonale may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Novartis and Banque Cantonale

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

The idea behind Novartis AG and Banque Cantonale 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.