Correlation Between Novocure and DigitalOcean Holdings

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

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

Diversification Opportunities for Novocure and DigitalOcean Holdings

-0.61

Correlation Coefficient

Novocure  DigitalOcean Holdings

Excellent diversification

The 3 months correlation between Novocure and DigitalOcean is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Novocure and DigitalOcean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigitalOcean Holdings 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 DigitalOcean Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigitalOcean Holdings has no effect on the direction of Novocure i.e., Novocure and DigitalOcean Holdings go up and down completely randomly.

Pair Corralation between Novocure and DigitalOcean Holdings

Given the investment horizon of 90 days Novocure is expected to under-perform the DigitalOcean Holdings. In addition to that, Novocure is 1.06 times more volatile than DigitalOcean Holdings. It trades about -0.2 of its total potential returns per unit of risk. DigitalOcean Holdings is currently generating about 0.02 per unit of volatility. If you would invest  3,995  in DigitalOcean Holdings on December 4, 2024 and sell it today you would earn a total of  40.00  from holding DigitalOcean Holdings or generate 1.0% return on investment over 90 days.

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

Novocure  vs.  DigitalOcean Holdings

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.

DigitalOcean Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DigitalOcean Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, DigitalOcean Holdings is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Novocure and DigitalOcean Holdings

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

The idea behind Novocure and DigitalOcean Holdings 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.