Correlation Between Senseonics Holdings and Novartis

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

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

Diversification Opportunities for Senseonics Holdings and Novartis

0.34

Correlation Coefficient

Senseonics Holdings  Novartis

Weak diversification

The 3 months correlation between Senseonics and Novartis is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Senseonics Holdings 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 Senseonics Holdings 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 Senseonics Holdings 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 Senseonics Holdings i.e., Senseonics Holdings and Novartis go up and down completely randomly.

Pair Corralation between Senseonics Holdings and Novartis

Given the investment horizon of 90 days Senseonics Holdings is expected to under-perform the Novartis. In addition to that, Senseonics Holdings is 3.23 times more volatile than Novartis AG ADR. It trades about -0.31 of its total potential returns per unit of risk. Novartis AG ADR is currently generating about 0.11 per unit of volatility. If you would invest  9,573  in Novartis AG ADR on January 25, 2024 and sell it today you would earn a total of  264.00  from holding Novartis AG ADR or generate 2.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Senseonics Holdings  vs.  Novartis AG ADR

Senseonics Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Senseonics Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 comparatively stable basic indicators, Novartis is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Senseonics Holdings and Novartis

The main advantage of trading using opposite Senseonics Holdings and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Senseonics Holdings 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 Senseonics Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.