Correlation Between Lockheed Martin and Novocure
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Novocure 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 Lockheed Martin and Novocure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Novocure, you can compare the effects of market volatilities on Lockheed Martin and Novocure 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 Lockheed Martin with a short position of Novocure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Novocure.
Diversification Opportunities for Lockheed Martin and Novocure
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lockheed and Novocure is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Novocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novocure and Lockheed Martin 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 Lockheed Martin are associated (or correlated) with Novocure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novocure has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Novocure go up and down completely randomly.
Pair Corralation between Lockheed Martin and Novocure
Considering the 90-day investment horizon Lockheed Martin is expected to under-perform the Novocure. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 8.96 times less risky than Novocure. The stock trades about -0.44 of its potential returns per unit of risk. The Novocure is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,782 in Novocure on September 13, 2024 and sell it today you would earn a total of 1,224 from holding Novocure or generate 68.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. Novocure
Performance |
| Timeline |
| Lockheed Martin |
| Novocure |
Lockheed Martin and Novocure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Novocure
The main advantage of trading using opposite Lockheed Martin and Novocure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Novocure 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 Novocure will offset losses from the drop in Novocure's long position.| Lockheed Martin vs. Novocure | Lockheed Martin vs. HubSpot | Lockheed Martin vs. DigitalOcean Holdings | Lockheed Martin vs. Appian Corp |
| Novocure vs. Globus Medical | Novocure vs. Insulet | Novocure vs. Inspire Medical Systems | Novocure vs. Inari Medical |
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.
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