Correlation Between Novartis and Biogen

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

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

Diversification Opportunities for Novartis and Biogen

-0.32
  Correlation Coefficient
Novartis AG
Biogen Inc

Very good diversification

The 3 months correlation between Novartis and Biogen is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG and Biogen Inc in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc 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 Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of Novartis i.e. Novartis and Biogen go up and down completely randomly.

Pair Corralation between Novartis and Biogen

Considering the 30-days investment horizon, Novartis AG is expected to generate 0.57 times more return on investment than Biogen. However, Novartis AG is 1.76 times less risky than Biogen. It trades about 0.04 of its potential returns per unit of risk. Biogen Inc is currently generating about -0.09 per unit of risk. If you would invest  8,562  in Novartis AG on June 7, 2020 and sell it today you would earn a total of  284.00  from holding Novartis AG or generate 3.32% return on investment over 30 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Novartis AG  vs.  Biogen Inc

 Performance (%) 
      Timeline 
Novartis AG 
33

Novartis Risk-Adjusted Performance

Compared to the overall equity markets, risk-adjusted returns on investments in Novartis AG are ranked lower than 3 (%) of all global equities and portfolios over the last 30 days. In defiance of relatively invariable forward-looking signals, Novartis is not utilizing all of its potentials. The current stock price agitation, may contribute to short term losses for the retail investors.
Biogen Inc 
00

Biogen Risk-Adjusted Performance

Over the last 30 days Biogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in August 2020. The current disturbance may also be a sign of long term up-swing for the company investors.

Novartis and Biogen Volatility Contrast

 Predicted Return Density 
      Returns 
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