Correlation Between Dun Bradstreet and Novartis

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

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

Diversification Opportunities for Dun Bradstreet and Novartis

0.87

Correlation Coefficient

Dun Bradstreet  Novartis

Very poor diversification

The 3 months correlation between Dun and Novartis is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dun Bradstreet 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 Dun Bradstreet 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 Dun Bradstreet 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 Dun Bradstreet i.e., Dun Bradstreet and Novartis go up and down completely randomly.

Pair Corralation between Dun Bradstreet and Novartis

Considering the 90-day investment horizon Dun Bradstreet Holdings is expected to under-perform the Novartis. In addition to that, Dun Bradstreet is 1.51 times more volatile than Novartis AG ADR. It trades about -0.14 of its total potential returns per unit of risk. Novartis AG ADR is currently generating about -0.07 per unit of volatility. If you would invest  9,608  in Novartis AG ADR on January 21, 2024 and sell it today you would lose (172.00) from holding Novartis AG ADR or give up 1.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Dun Bradstreet Holdings  vs.  Novartis AG ADR

Dun Bradstreet Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dun Bradstreet Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company 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 latest uncertain 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.

Pair Trading with Dun Bradstreet and Novartis

The main advantage of trading using opposite Dun Bradstreet and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dun Bradstreet 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 Dun Bradstreet 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.