Correlation Between CSL and Novartis

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

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

Diversification Opportunities for CSL and Novartis

0.19

Correlation Coefficient

CSL  Novartis

Average diversification

The 3 months correlation between CSL and Novartis is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding CSL 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 CSL 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 CSL 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 CSL i.e., CSL and Novartis go up and down completely randomly.

Pair Corralation between CSL and Novartis

Assuming the 90 days horizon CSL is expected to generate 0.99 times more return on investment than Novartis. However, CSL is 1.01 times less risky than Novartis. It trades about 0.15 of its potential returns per unit of risk. Novartis AG ADR is currently generating about 0.13 per unit of risk. If you would invest  7,621  in CSL on May 13, 2025 and sell it today you would earn a total of  974.00  from holding CSL or generate 12.78% return on investment over 90 days.

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

CSL  vs.  Novartis AG ADR

CSL

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CSL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, CSL showed solid returns over the last few months and may actually be approaching a breakup point.

Novartis AG ADR

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Novartis AG ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Novartis may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with CSL and Novartis

The main advantage of trading using opposite CSL and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL 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 CSL 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.