Correlation Between Novartis and AstraZeneca PLC
Can any of the company-specific risk be diversified away by investing in both Novartis and AstraZeneca PLC 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 AstraZeneca PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novartis AG ADR and AstraZeneca PLC ADR, you can compare the effects of market volatilities on Novartis and AstraZeneca PLC 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 AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novartis and AstraZeneca PLC.
Diversification Opportunities for Novartis and AstraZeneca PLC
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Novartis and AstraZeneca is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG ADR and AstraZeneca PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC ADR 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 AG ADR are associated (or correlated) with AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC ADR has no effect on the direction of Novartis i.e., Novartis and AstraZeneca PLC go up and down completely randomly.
Pair Corralation between Novartis and AstraZeneca PLC
Considering the 90-day investment horizon Novartis is expected to generate 4.43 times less return on investment than AstraZeneca PLC. But when comparing it to its historical volatility, Novartis AG ADR is 1.15 times less risky than AstraZeneca PLC. It trades about 0.09 of its potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 6,048 in AstraZeneca PLC ADR on February 12, 2024 and sell it today you would earn a total of 1,670 from holding AstraZeneca PLC ADR or generate 27.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Novartis AG ADR vs. AstraZeneca PLC ADR
Performance |
| Timeline |
| Novartis AG ADR |
| AstraZeneca PLC ADR |
Novartis and AstraZeneca PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novartis and AstraZeneca PLC
The main advantage of trading using opposite Novartis and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, AstraZeneca PLC 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 AstraZeneca PLC will offset losses from the drop in AstraZeneca PLC's long position.| Novartis vs. Dell Technologies | Novartis vs. MIRA Pharmaceuticals Common | Novartis vs. Planet Fitness | Novartis vs. VanEck Pharmaceutical ETF |
| AstraZeneca PLC vs. Dell Technologies | AstraZeneca PLC vs. MIRA Pharmaceuticals Common | AstraZeneca PLC vs. Planet Fitness | AstraZeneca PLC vs. VanEck Pharmaceutical ETF |
Check out your portfolio center.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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