Correlation Between Neuropace and Novocure

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

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

Diversification Opportunities for Neuropace and Novocure

0.81

Correlation Coefficient

Neuropace  Novocure

Very poor diversification

The 3 months correlation between Neuropace and Novocure is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Neuropace and Novocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novocure and Neuropace 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 Neuropace 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 Neuropace i.e., Neuropace and Novocure go up and down completely randomly.

Pair Corralation between Neuropace and Novocure

Given the investment horizon of 90 days Neuropace is expected to generate 1.23 times less return on investment than Novocure. But when comparing it to its historical volatility, Neuropace is 1.36 times less risky than Novocure. It trades about 0.16 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  1,796  in Novocure on September 14, 2024 and sell it today you would earn a total of  1,210  from holding Novocure or generate 67.37% return on investment over 90 days.

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

Neuropace  vs.  Novocure

Neuropace

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Neuropace and Novocure

The main advantage of trading using opposite Neuropace and Novocure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neuropace 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 Neuropace 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 Stocks Directory module to find actively traded stocks across global markets.