Correlation Between NOVARTIS and 90331HPL1

Can any of the company-specific risk be diversified away by investing in both NOVARTIS and 90331HPL1 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 90331HPL1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NOVARTIS CAPITAL P and US BANK NATIONAL, you can compare the effects of market volatilities on NOVARTIS and 90331HPL1 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 90331HPL1. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOVARTIS and 90331HPL1.

Diversification Opportunities for NOVARTIS and 90331HPL1

0.74

Correlation Coefficient

NOVARTIS  90331HPL1

Poor diversification

The 3 months correlation between NOVARTIS and 90331HPL1 is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding NOVARTIS CAPITAL P and US BANK NATIONAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US BANK NATIONAL 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 CAPITAL P are associated (or correlated) with 90331HPL1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US BANK NATIONAL has no effect on the direction of NOVARTIS i.e., NOVARTIS and 90331HPL1 go up and down completely randomly.

Pair Corralation between NOVARTIS and 90331HPL1

Assuming the 90 days trading horizon NOVARTIS CAPITAL P is expected to generate 0.6 times more return on investment than 90331HPL1. However, NOVARTIS CAPITAL P is 1.66 times less risky than 90331HPL1. It trades about -0.03 of its potential returns per unit of risk. US BANK NATIONAL is currently generating about -0.03 per unit of risk. If you would invest  9,253  in NOVARTIS CAPITAL P on October 22, 2024 and sell it today you would lose (173.00) from holding NOVARTIS CAPITAL P or give up 1.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	63.39%
Values	Daily Returns

NOVARTIS CAPITAL P  vs.  US BANK NATIONAL

NOVARTIS CAPITAL P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOVARTIS CAPITAL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NOVARTIS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

US BANK NATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NOVARTIS and 90331HPL1

The main advantage of trading using opposite NOVARTIS and 90331HPL1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NOVARTIS position performs unexpectedly, 90331HPL1 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 90331HPL1 will offset losses from the drop in 90331HPL1's long position.

The idea behind NOVARTIS CAPITAL P and US BANK NATIONAL 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.