Correlation Between Curtiss Wright and Novocure

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

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

Diversification Opportunities for Curtiss Wright and Novocure

0.44

Correlation Coefficient

Curtiss Wright  Novocure

Very weak diversification

The 3 months correlation between Curtiss and Novocure is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Curtiss Wright and Novocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novocure and Curtiss Wright 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 Curtiss Wright 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 Curtiss Wright i.e., Curtiss Wright and Novocure go up and down completely randomly.

Pair Corralation between Curtiss Wright and Novocure

Allowing for the 90-day total investment horizon Curtiss Wright is expected to under-perform the Novocure. But the stock apears to be less risky and, when comparing its historical volatility, Curtiss Wright is 5.0 times less risky than Novocure. The stock trades about -0.06 of its potential returns per unit of risk. The Novocure is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,709  in Novocure on September 22, 2024 and sell it today you would earn a total of  1,371  from holding Novocure or generate 80.22% return on investment over 90 days.

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

Curtiss Wright  vs.  Novocure

Curtiss Wright

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Curtiss Wright are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Curtiss Wright may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Novocure

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Novocure are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Novocure reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Curtiss Wright and Novocure

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

The idea behind Curtiss Wright and Novocure 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.