Correlation Between Amicus Therapeutics and Novartis

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

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

Diversification Opportunities for Amicus Therapeutics and Novartis

0.63

Correlation Coefficient

Amicus Therapeutics  Novartis

Poor diversification

The 3 months correlation between Amicus and Novartis is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Amicus Therapeutics 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 Amicus Therapeutics 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 Amicus Therapeutics 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 Amicus Therapeutics i.e., Amicus Therapeutics and Novartis go up and down completely randomly.

Pair Corralation between Amicus Therapeutics and Novartis

Given the investment horizon of 90 days Amicus Therapeutics is expected to under-perform the Novartis. In addition to that, Amicus Therapeutics is 2.35 times more volatile than Novartis AG ADR. It trades about 0.0 of its total potential returns per unit of risk. Novartis AG ADR is currently generating about 0.06 per unit of volatility. If you would invest  7,920  in Novartis AG ADR on September 5, 2024 and sell it today you would earn a total of  2,536  from holding Novartis AG ADR or generate 32.02% return on investment over 90 days.

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

Amicus Therapeutics  vs.  Novartis AG ADR

Amicus Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amicus Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 weak 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 Amicus Therapeutics and Novartis

The main advantage of trading using opposite Amicus Therapeutics and Novartis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amicus Therapeutics 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 Amicus Therapeutics 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.