Correlation Between Santen Pharmaceutical and Novartis
Can any of the company-specific risk be diversified away by investing in both Santen Pharmaceutical 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 Santen Pharmaceutical and Novartis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Santen Pharmaceutical Co and Novartis AG, you can compare the effects of market volatilities on Santen Pharmaceutical 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 Santen Pharmaceutical with a short position of Novartis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Santen Pharmaceutical and Novartis.
Diversification Opportunities for Santen Pharmaceutical and Novartis
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Santen and Novartis is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Santen Pharmaceutical Co and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG and Santen Pharmaceutical 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 Santen Pharmaceutical Co 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 has no effect on the direction of Santen Pharmaceutical i.e., Santen Pharmaceutical and Novartis go up and down completely randomly.
Pair Corralation between Santen Pharmaceutical and Novartis
Assuming the 90 days horizon Santen Pharmaceutical Co is expected to under-perform the Novartis. In addition to that, Santen Pharmaceutical is 1.18 times more volatile than Novartis AG. It trades about -0.01 of its total potential returns per unit of risk. Novartis AG is currently generating about 0.02 per unit of volatility. If you would invest 9,568 in Novartis AG on January 26, 2024 and sell it today you would earn a total of 32.00 from holding Novartis AG or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Santen Pharmaceutical Co vs. Novartis AG
Performance |
| Timeline |
| Santen Pharmaceutical |
| Novartis AG |
Santen Pharmaceutical and Novartis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Santen Pharmaceutical and Novartis
The main advantage of trading using opposite Santen Pharmaceutical and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Santen Pharmaceutical 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.| Santen Pharmaceutical vs. Grifols SA ADR | Santen Pharmaceutical vs. Pfizer Inc | Santen Pharmaceutical vs. Sanofi ADR | Santen Pharmaceutical vs. Organon Co |
| Novartis vs. Roche Holding AG | Novartis vs. AstraZeneca PLC | Novartis vs. Roche Holding Ltd | Novartis vs. Sanofi ADR |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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