Correlation Between Novartis and Novartis

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

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

Diversification Opportunities for Novartis and Novartis

0.94

Correlation Coefficient

Novartis  Novartis

Almost no diversification

The 3 months correlation between Novartis and Novartis is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG 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 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 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 Novartis i.e., Novartis and Novartis go up and down completely randomly.

Pair Corralation between Novartis and Novartis

Assuming the 90 days horizon Novartis is expected to generate 1.04 times less return on investment than Novartis. In addition to that, Novartis is 1.72 times more volatile than Novartis AG ADR. It trades about 0.13 of its total potential returns per unit of risk. Novartis AG ADR is currently generating about 0.23 per unit of volatility. If you would invest  9,503  in Novartis AG ADR on December 21, 2024 and sell it today you would earn a total of  1,818  from holding Novartis AG ADR or generate 19.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

Novartis AG  vs.  Novartis AG ADR

Novartis AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Novartis AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Novartis reported solid returns over the last few months and may actually be approaching a breakup point.

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 Novartis and Novartis

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

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 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.