Correlation Between Novocure and Kratos Defense

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

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

Diversification Opportunities for Novocure and Kratos Defense

-0.1

Correlation Coefficient

Novocure  Kratos Defense

Good diversification

The 3 months correlation between Novocure and Kratos is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Novocure and Kratos Defense Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kratos Defense Security 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 Kratos Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kratos Defense Security has no effect on the direction of Novocure i.e., Novocure and Kratos Defense go up and down completely randomly.

Pair Corralation between Novocure and Kratos Defense

Given the investment horizon of 90 days Novocure is expected to under-perform the Kratos Defense. But the stock apears to be less risky and, when comparing its historical volatility, Novocure is 1.09 times less risky than Kratos Defense. The stock trades about -0.25 of its potential returns per unit of risk. The Kratos Defense Security is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,599  in Kratos Defense Security on December 22, 2024 and sell it today you would earn a total of  482.00  from holding Kratos Defense Security or generate 18.55% return on investment over 90 days.

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

Novocure  vs.  Kratos Defense Security

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.

Kratos Defense Security

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kratos Defense Security are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Kratos Defense unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novocure and Kratos Defense

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

The idea behind Novocure and Kratos Defense Security 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.