Correlation Between MEI Pharma and Novartis

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

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

Diversification Opportunities for MEI Pharma and Novartis

-0.17

Correlation Coefficient

MEI Pharma  Novartis

Good diversification

The 3 months correlation between MEI and Novartis is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding MEI Pharma 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 MEI Pharma 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 MEI Pharma 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 MEI Pharma i.e., MEI Pharma and Novartis go up and down completely randomly.

Pair Corralation between MEI Pharma and Novartis

Given the investment horizon of 90 days MEI Pharma is expected to generate 1.58 times more return on investment than Novartis. However, MEI Pharma is 1.58 times more volatile than Novartis AG ADR. It trades about 0.17 of its potential returns per unit of risk. Novartis AG ADR is currently generating about 0.01 per unit of risk. If you would invest  199.00  in MEI Pharma on February 27, 2025 and sell it today you would earn a total of  16.00  from holding MEI Pharma or generate 8.04% return on investment over 90 days.

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

MEI Pharma  vs.  Novartis AG ADR

MEI Pharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days MEI Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in June 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Novartis AG ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Novartis AG ADR are ranked lower than 6 (%) 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 June 2025.

Pair Trading with MEI Pharma and Novartis

The main advantage of trading using opposite MEI Pharma and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEI Pharma 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 MEI Pharma 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.