Correlation Between SoundHound and NOVARTIS

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

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

Diversification Opportunities for SoundHound and NOVARTIS

-0.82

Correlation Coefficient

SoundHound  NOVARTIS

Pay attention - limited upside

The 3 months correlation between SoundHound and NOVARTIS is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding SoundHound AI and NOVARTIS CAPITAL P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVARTIS CAPITAL P and SoundHound 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 SoundHound AI 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 CAPITAL P has no effect on the direction of SoundHound i.e., SoundHound and NOVARTIS go up and down completely randomly.

Pair Corralation between SoundHound and NOVARTIS

Given the investment horizon of 90 days SoundHound AI is expected to generate 21.49 times more return on investment than NOVARTIS. However, SoundHound is 21.49 times more volatile than NOVARTIS CAPITAL P. It trades about 0.26 of its potential returns per unit of risk. NOVARTIS CAPITAL P is currently generating about -0.18 per unit of risk. If you would invest  487.00  in SoundHound AI on September 12, 2024 and sell it today you would earn a total of  936.00  from holding SoundHound AI or generate 192.2% return on investment over 90 days.

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

SoundHound AI  vs.  NOVARTIS CAPITAL P

SoundHound AI

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SoundHound AI are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SoundHound displayed solid returns over the last few months and may actually be approaching a breakup point.

NOVARTIS CAPITAL P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOVARTIS CAPITAL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NOVARTIS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SoundHound and NOVARTIS

The main advantage of trading using opposite SoundHound and NOVARTIS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoundHound 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's long position.

The idea behind SoundHound AI and NOVARTIS CAPITAL P 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.