Correlation Between Novocure and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both Novocure and Lockheed Martin 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 Novocure and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novocure and Lockheed Martin, you can compare the effects of market volatilities on Novocure and Lockheed Martin 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 Novocure with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novocure and Lockheed Martin.
Diversification Opportunities for Novocure and Lockheed Martin
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Novocure and Lockheed is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Novocure and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Novocure 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 Novocure are associated (or correlated) with Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of Novocure i.e., Novocure and Lockheed Martin go up and down completely randomly.
Pair Corralation between Novocure and Lockheed Martin
Given the investment horizon of 90 days Novocure is expected to generate 8.96 times more return on investment than Lockheed Martin. However, Novocure is 8.96 times more volatile than Lockheed Martin. It trades about 0.26 of its potential returns per unit of risk. Lockheed Martin is currently generating about -0.44 per unit of risk. 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 |
Novocure vs. Lockheed Martin
Performance |
| Timeline |
| Novocure |
| Lockheed Martin |
Novocure and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Novocure and Lockheed Martin
The main advantage of trading using opposite Novocure and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novocure position performs unexpectedly, Lockheed Martin 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 Lockheed Martin will offset losses from the drop in Lockheed Martin's long position.| Novocure vs. Globus Medical | Novocure vs. Insulet | Novocure vs. Inspire Medical Systems | Novocure vs. Inari Medical |
| Lockheed Martin vs. Novocure | Lockheed Martin vs. HubSpot | Lockheed Martin vs. DigitalOcean Holdings | Lockheed Martin vs. Appian Corp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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