Correlation Between Sonova H and Novartis

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

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

Diversification Opportunities for Sonova H and Novartis

-0.08

Correlation Coefficient

Sonova H  Novartis

Good diversification

The 3 months correlation between Sonova and Novartis is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sonova H Ag and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG and Sonova H 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 Sonova H 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 has no effect on the direction of Sonova H i.e., Sonova H and Novartis go up and down completely randomly.

Pair Corralation between Sonova H and Novartis

Assuming the 90 days trading horizon Sonova H Ag is expected to under-perform the Novartis. In addition to that, Sonova H is 1.69 times more volatile than Novartis AG. It trades about -0.2 of its total potential returns per unit of risk. Novartis AG is currently generating about -0.13 per unit of volatility. If you would invest  9,558  in Novartis AG on September 5, 2024 and sell it today you would lose (256.00) from holding Novartis AG or give up 2.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sonova H Ag  vs.  Novartis AG

Sonova H Ag

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonova H Ag has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sonova H is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated 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. In spite of fairly stable basic indicators, Novartis is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Sonova H and Novartis

The main advantage of trading using opposite Sonova H and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonova H 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 Sonova H Ag 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.