Correlation Between Weibo Corp and NOVARTIS

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

By analyzing existing cross correlation between Weibo Corp and NOVARTIS CAPITAL P, you can compare the effects of market volatilities on Weibo Corp 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 Weibo Corp with a short position of NOVARTIS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weibo Corp and NOVARTIS.

Diversification Opportunities for Weibo Corp and NOVARTIS

0.2

Correlation Coefficient

Weibo Corp  NOVARTIS

Modest diversification

The 3 months correlation between Weibo and NOVARTIS is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and NOVARTIS CAPITAL P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVARTIS CAPITAL P and Weibo Corp 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 Weibo Corp 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 CAPITAL P has no effect on the direction of Weibo Corp i.e., Weibo Corp and NOVARTIS go up and down completely randomly.

Pair Corralation between Weibo Corp and NOVARTIS

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 4.52 times more return on investment than NOVARTIS. However, Weibo Corp is 4.52 times more volatile than NOVARTIS CAPITAL P. It trades about 0.03 of its potential returns per unit of risk. NOVARTIS CAPITAL P is currently generating about -0.12 per unit of risk. If you would invest  990.00  in Weibo Corp on December 22, 2024 and sell it today you would earn a total of  22.00  from holding Weibo Corp or generate 2.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Weibo Corp  vs.  NOVARTIS CAPITAL P

Weibo Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Weibo Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NOVARTIS CAPITAL P

Risk-Adjusted Performance

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Weibo Corp and NOVARTIS

The main advantage of trading using opposite Weibo Corp and NOVARTIS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp 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's long position.

The idea behind Weibo Corp and NOVARTIS CAPITAL P 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.