Correlation Between Otsuka Holdings and Novartis

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

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

Diversification Opportunities for Otsuka Holdings and Novartis

0.3

Correlation Coefficient

Otsuka Holdings  Novartis

Weak diversification

The 3 months correlation between Otsuka and Novartis is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Otsuka Holdings Co 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 Otsuka Holdings 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 Otsuka Holdings Co 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 Otsuka Holdings i.e., Otsuka Holdings and Novartis go up and down completely randomly.

Pair Corralation between Otsuka Holdings and Novartis

Assuming the 90 days horizon Otsuka Holdings Co is expected to generate 1.37 times more return on investment than Novartis. However, Otsuka Holdings is 1.37 times more volatile than Novartis AG ADR. It trades about 0.02 of its potential returns per unit of risk. Novartis AG ADR is currently generating about 0.02 per unit of risk. If you would invest  3,880  in Otsuka Holdings Co on September 16, 2024 and sell it today you would earn a total of  68.00  from holding Otsuka Holdings Co or generate 1.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	51.61%
Values	Daily Returns

Otsuka Holdings Co  vs.  Novartis AG ADR

Otsuka Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otsuka Holdings Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Otsuka Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Otsuka Holdings and Novartis

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

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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 Stocks Directory module to find actively traded stocks across global markets.