Correlation Between Novartis and Swiss Life

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

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

Diversification Opportunities for Novartis and Swiss Life

0.39

Correlation Coefficient

Novartis  Swiss Life

Weak diversification

The 3 months correlation between Novartis and Swiss is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Novartis AG and Swiss Life Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Life Holding 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 Swiss Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Life Holding has no effect on the direction of Novartis i.e., Novartis and Swiss Life go up and down completely randomly.

Pair Corralation between Novartis and Swiss Life

Assuming the 90 days trading horizon Novartis is expected to generate 17.96 times less return on investment than Swiss Life. In addition to that, Novartis is 1.34 times more volatile than Swiss Life Holding. It trades about 0.01 of its total potential returns per unit of risk. Swiss Life Holding is currently generating about 0.18 per unit of volatility. If you would invest  76,543  in Swiss Life Holding on April 24, 2025 and sell it today you would earn a total of  6,417  from holding Swiss Life Holding or generate 8.38% return on investment over 90 days.

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

Novartis AG  vs.  Swiss Life Holding

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.

Swiss Life Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Life Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Swiss Life may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Novartis and Swiss Life

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

The idea behind Novartis AG and Swiss Life Holding 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.