Correlation Between Novartis and Ono Pharmaceutical

Can any of the company-specific risk be diversified away by investing in both Novartis and Ono Pharmaceutical 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 Ono Pharmaceutical 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 Ono Pharmaceutical Co, you can compare the effects of market volatilities on Novartis and Ono Pharmaceutical 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 Ono Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and Ono Pharmaceutical.

Diversification Opportunities for Novartis and Ono Pharmaceutical

0.94

Correlation Coefficient

Novartis  Ono Pharmaceutical

Almost no diversification

The 3 months correlation between Novartis and Ono is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG ADR and Ono Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ono Pharmaceutical 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 Ono Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ono Pharmaceutical has no effect on the direction of Novartis i.e., Novartis and Ono Pharmaceutical go up and down completely randomly.

Pair Corralation between Novartis and Ono Pharmaceutical

Considering the 90-day investment horizon Novartis AG ADR is expected to generate 0.59 times more return on investment than Ono Pharmaceutical. However, Novartis AG ADR is 1.7 times less risky than Ono Pharmaceutical. It trades about -0.28 of its potential returns per unit of risk. Ono Pharmaceutical Co is currently generating about -0.2 per unit of risk. If you would invest  11,695  in Novartis AG ADR on September 15, 2024 and sell it today you would lose (1,859) from holding Novartis AG ADR or give up 15.9% of portfolio value over 90 days.

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

Novartis AG ADR  vs.  Ono Pharmaceutical Co

Novartis AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novartis AG ADR 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 comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Ono Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Novartis and Ono Pharmaceutical

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

The idea behind Novartis AG ADR and Ono Pharmaceutical Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.