Correlation Between Novocure and Archer Aviation

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

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

Diversification Opportunities for Novocure and Archer Aviation

0.77

Correlation Coefficient

Novocure  Archer Aviation

Poor diversification

The 3 months correlation between Novocure and Archer is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Novocure and Archer Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Aviation 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 Archer Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Aviation has no effect on the direction of Novocure i.e., Novocure and Archer Aviation go up and down completely randomly.

Pair Corralation between Novocure and Archer Aviation

Given the investment horizon of 90 days Novocure is expected to generate 1.54 times less return on investment than Archer Aviation. But when comparing it to its historical volatility, Novocure is 1.01 times less risky than Archer Aviation. It trades about 0.16 of its potential returns per unit of risk. Archer Aviation is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  311.00  in Archer Aviation on September 14, 2024 and sell it today you would earn a total of  521.00  from holding Archer Aviation or generate 167.52% return on investment over 90 days.

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

Novocure  vs.  Archer Aviation

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.

Archer Aviation

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Aviation are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Archer Aviation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novocure and Archer Aviation

The main advantage of trading using opposite Novocure and Archer Aviation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novocure position performs unexpectedly, Archer Aviation 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 Archer Aviation will offset losses from the drop in Archer Aviation's long position.

The idea behind Novocure and Archer Aviation 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.