Correlation Between Swisscom and Novartis

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

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

Diversification Opportunities for Swisscom and Novartis

0.77

Correlation Coefficient

Swisscom  Novartis

Poor diversification

The 3 months correlation between Swisscom and Novartis is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Swisscom AG and Novartis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novartis AG and Swisscom 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 Swisscom AG 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 has no effect on the direction of Swisscom i.e., Swisscom and Novartis go up and down completely randomly.

Pair Corralation between Swisscom and Novartis

Assuming the 90 days trading horizon Swisscom AG is expected to generate 0.76 times more return on investment than Novartis. However, Swisscom AG is 1.31 times less risky than Novartis. It trades about 0.09 of its potential returns per unit of risk. Novartis AG is currently generating about 0.03 per unit of risk. If you would invest  53,750  in Swisscom AG on April 22, 2025 and sell it today you would earn a total of  2,100  from holding Swisscom AG or generate 3.91% return on investment over 90 days.

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

Swisscom AG  vs.  Novartis AG

Swisscom AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Swisscom AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Swisscom is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Novartis AG

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Novartis AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Swisscom and Novartis

The main advantage of trading using opposite Swisscom and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swisscom 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 Swisscom AG and Novartis 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.