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

0.6

Correlation Coefficient

Lockheed Martin  Novocure

Poor diversification

The 3 months correlation between Lockheed and Novocure is 0.6. 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 generate 0.66 times more return on investment than Novocure. However, Lockheed Martin is 1.5 times less risky than Novocure. It trades about -0.06 of its potential returns per unit of risk. Novocure is currently generating about -0.28 per unit of risk. If you would invest  48,539  in Lockheed Martin on December 27, 2024 and sell it today you would lose (4,022) from holding Lockheed Martin or give up 8.29% of portfolio value over 90 days.

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

Lockheed Martin  vs.  Novocure

Lockheed Martin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lockheed Martin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Novocure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Novocure has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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.

The idea behind Lockheed Martin 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.