Correlation Between Novartis and Implenia

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

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

Diversification Opportunities for Novartis and Implenia

0.8

Correlation Coefficient

Novartis  Implenia

Very poor diversification

The 3 months correlation between Novartis and Implenia is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG and Implenia AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Implenia AG 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 Implenia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Implenia AG has no effect on the direction of Novartis i.e., Novartis and Implenia go up and down completely randomly.

Pair Corralation between Novartis and Implenia

Assuming the 90 days trading horizon Novartis is expected to generate 37.12 times less return on investment than Implenia. But when comparing it to its historical volatility, Novartis AG is 2.04 times less risky than Implenia. It trades about 0.01 of its potential returns per unit of risk. Implenia AG is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,485  in Implenia AG on April 24, 2025 and sell it today you would earn a total of  765.00  from holding Implenia AG or generate 17.06% return on investment over 90 days.

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

Novartis AG  vs.  Implenia AG

Novartis AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Novartis AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Novartis is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Implenia AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Implenia AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Implenia showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novartis and Implenia

The main advantage of trading using opposite Novartis and Implenia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novartis position performs unexpectedly, Implenia 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 Implenia will offset losses from the drop in Implenia's long position.

The idea behind Novartis AG and Implenia AG 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.