Correlation Between Novartis and Novartis

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

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

Diversification Opportunities for Novartis and Novartis

0.84

Correlation Coefficient

Novartis  Novartis

Very poor diversification

The 3 months correlation between Novartis and Novartis is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG and Novartis AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG 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 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 ADR has no effect on the direction of Novartis i.e., Novartis and Novartis go up and down completely randomly.

Pair Corralation between Novartis and Novartis

Assuming the 90 days horizon Novartis AG is expected to generate 2.13 times more return on investment than Novartis. However, Novartis is 2.13 times more volatile than Novartis AG ADR. It trades about -0.11 of its potential returns per unit of risk. Novartis AG ADR is currently generating about -0.29 per unit of risk. If you would invest  11,200  in Novartis AG on August 25, 2024 and sell it today you would lose (800.00) from holding Novartis AG or give up 7.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Novartis AG  vs.  Novartis AG ADR

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. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Novartis AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novartis AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Novartis and Novartis

The main advantage of trading using opposite Novartis and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis 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 Novartis AG and Novartis AG ADR 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.