Correlation Between Novocure and HubSpot

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

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

Diversification Opportunities for Novocure and HubSpot

0.65

Correlation Coefficient

Novocure  HubSpot

Poor diversification

The 3 months correlation between Novocure and HubSpot is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Novocure and HubSpot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HubSpot 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 HubSpot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HubSpot has no effect on the direction of Novocure i.e., Novocure and HubSpot go up and down completely randomly.

Pair Corralation between Novocure and HubSpot

Given the investment horizon of 90 days Novocure is expected to generate 3.49 times more return on investment than HubSpot. However, Novocure is 3.49 times more volatile than HubSpot. It trades about 0.14 of its potential returns per unit of risk. HubSpot is currently generating about 0.3 per unit of risk. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Novocure  vs.  HubSpot

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.

HubSpot

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HubSpot are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental drivers, HubSpot unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novocure and HubSpot

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

The idea behind Novocure and HubSpot 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.