Correlation Between Dimed SA and Novartis

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

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

Diversification Opportunities for Dimed SA and Novartis

0.39

Correlation Coefficient

Dimed SA  Novartis

Weak diversification

The 3 months correlation between Dimed and Novartis is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Dimed SA Distribuidora and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG and Dimed SA 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 Dimed SA Distribuidora 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 has no effect on the direction of Dimed SA i.e., Dimed SA and Novartis go up and down completely randomly.

Pair Corralation between Dimed SA and Novartis

Assuming the 90 days trading horizon Dimed SA Distribuidora is expected to generate 0.8 times more return on investment than Novartis. However, Dimed SA Distribuidora is 1.25 times less risky than Novartis. It trades about -0.05 of its potential returns per unit of risk. Novartis AG is currently generating about -0.06 per unit of risk. If you would invest  1,022  in Dimed SA Distribuidora on September 13, 2024 and sell it today you would lose (48.00) from holding Dimed SA Distribuidora or give up 4.7% of portfolio value over 90 days.

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

Dimed SA Distribuidora  vs.  Novartis AG

Dimed SA Distribuidora

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimed SA Distribuidora has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dimed SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Novartis AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novartis AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Dimed SA and Novartis

The main advantage of trading using opposite Dimed SA and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimed SA 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 Dimed SA Distribuidora and Novartis AG 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.