Correlation Between Novartis and Crinetics Pharmaceuticals

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

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

Diversification Opportunities for Novartis and Crinetics Pharmaceuticals

-0.74

Correlation Coefficient

Novartis  Crinetics Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Novartis and Crinetics is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG ADR and Crinetics Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crinetics Pharmaceuticals 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 ADR are associated (or correlated) with Crinetics Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crinetics Pharmaceuticals has no effect on the direction of Novartis i.e., Novartis and Crinetics Pharmaceuticals go up and down completely randomly.

Pair Corralation between Novartis and Crinetics Pharmaceuticals

Considering the 90-day investment horizon Novartis AG ADR is expected to generate 0.37 times more return on investment than Crinetics Pharmaceuticals. However, Novartis AG ADR is 2.69 times less risky than Crinetics Pharmaceuticals. It trades about 0.23 of its potential returns per unit of risk. Crinetics Pharmaceuticals is currently generating about -0.15 per unit of risk. If you would invest  9,395  in Novartis AG ADR on December 29, 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	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Novartis AG ADR  vs.  Crinetics Pharmaceuticals

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.

Crinetics Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crinetics Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Novartis and Crinetics Pharmaceuticals

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

The idea behind Novartis AG ADR and Crinetics Pharmaceuticals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.