Correlation Between NOVARTIS and Sapiens International

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

By analyzing existing cross correlation between NOVARTIS CAP P and Sapiens International, you can compare the effects of market volatilities on NOVARTIS and Sapiens International 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 Sapiens International. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOVARTIS and Sapiens International.

Diversification Opportunities for NOVARTIS and Sapiens International

0.27

Correlation Coefficient

NOVARTIS  Sapiens International

Modest diversification

The 3 months correlation between NOVARTIS and Sapiens is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding NOVARTIS CAP P and Sapiens International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapiens International 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 CAP P are associated (or correlated) with Sapiens International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapiens International has no effect on the direction of NOVARTIS i.e., NOVARTIS and Sapiens International go up and down completely randomly.

Pair Corralation between NOVARTIS and Sapiens International

Assuming the 90 days trading horizon NOVARTIS CAP P is expected to generate 0.59 times more return on investment than Sapiens International. However, NOVARTIS CAP P is 1.69 times less risky than Sapiens International. It trades about 0.1 of its potential returns per unit of risk. Sapiens International is currently generating about 0.0 per unit of risk. If you would invest  8,798  in NOVARTIS CAP P on December 25, 2024 and sell it today you would earn a total of  476.00  from holding NOVARTIS CAP P or generate 5.41% return on investment over 90 days.

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

NOVARTIS CAP P  vs.  Sapiens International

NOVARTIS CAP P

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NOVARTIS CAP P are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NOVARTIS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Sapiens International

Risk-Adjusted Performance

Very Weak

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

Pair Trading with NOVARTIS and Sapiens International

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

The idea behind NOVARTIS CAP P and Sapiens International 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..