Correlation Between Leonardo DRS, and Novocure

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

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

Diversification Opportunities for Leonardo DRS, and Novocure

0.49

Correlation Coefficient

Leonardo DRS,  Novocure

Very weak diversification

The 3 months correlation between Leonardo and Novocure is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Leonardo DRS, Common and Novocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novocure and Leonardo DRS, 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 Leonardo DRS, Common 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 Leonardo DRS, i.e., Leonardo DRS, and Novocure go up and down completely randomly.

Pair Corralation between Leonardo DRS, and Novocure

Considering the 90-day investment horizon Leonardo DRS, is expected to generate 2.63 times less return on investment than Novocure. But when comparing it to its historical volatility, Leonardo DRS, Common is 2.47 times less risky than Novocure. It trades about 0.13 of its potential returns per unit of risk. Novocure is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,857  in Novocure on September 13, 2024 and sell it today you would earn a total of  1,256  from holding Novocure or generate 67.64% return on investment over 90 days.

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

Leonardo DRS, Common  vs.  Novocure

Leonardo DRS, Common

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leonardo DRS, Common are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Leonardo DRS, unveiled solid returns over the last few months and may actually be approaching a breakup point.

Novocure

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Novocure are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Novocure reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leonardo DRS, and Novocure

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

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.