Correlation Between NOVARTIS and Deluxe

Can any of the company-specific risk be diversified away by investing in both NOVARTIS and Deluxe 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 Deluxe 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 Deluxe, you can compare the effects of market volatilities on NOVARTIS and Deluxe 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 Deluxe. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOVARTIS and Deluxe.

Diversification Opportunities for NOVARTIS and Deluxe

-0.42

Correlation Coefficient

NOVARTIS  Deluxe

Very good diversification

The 3 months correlation between NOVARTIS and Deluxe is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding NOVARTIS CAPITAL P and Deluxe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deluxe 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 Deluxe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deluxe has no effect on the direction of NOVARTIS i.e., NOVARTIS and Deluxe go up and down completely randomly.

Pair Corralation between NOVARTIS and Deluxe

Assuming the 90 days trading horizon NOVARTIS CAPITAL P is expected to generate 2.98 times more return on investment than Deluxe. However, NOVARTIS is 2.98 times more volatile than Deluxe. It trades about 0.21 of its potential returns per unit of risk. Deluxe is currently generating about -0.03 per unit of risk. If you would invest  6,508  in NOVARTIS CAPITAL P on September 20, 2024 and sell it today you would earn a total of  1,086  from holding NOVARTIS CAPITAL P or generate 16.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	86.36%
Values	Daily Returns

NOVARTIS CAPITAL P  vs.  Deluxe

NOVARTIS CAPITAL P

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NOVARTIS CAPITAL P are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, NOVARTIS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Deluxe

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NOVARTIS and Deluxe

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

The idea behind NOVARTIS CAPITAL P and Deluxe 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.