Correlation Between Park Electrochemical and Novocure

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

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

Diversification Opportunities for Park Electrochemical and Novocure

0.03

Correlation Coefficient

Park Electrochemical  Novocure

Significant diversification

The 3 months correlation between Park and Novocure is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Park Electrochemical and Novocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novocure and Park Electrochemical 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 Park Electrochemical 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 Park Electrochemical i.e., Park Electrochemical and Novocure go up and down completely randomly.

Pair Corralation between Park Electrochemical and Novocure

Considering the 90-day investment horizon Park Electrochemical is expected to under-perform the Novocure. But the stock apears to be less risky and, when comparing its historical volatility, Park Electrochemical is 4.05 times less risky than Novocure. The stock trades about -0.09 of its potential returns per unit of risk. The Novocure is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,004  in Novocure on November 28, 2024 and sell it today you would earn a total of  96.00  from holding Novocure or generate 4.79% return on investment over 90 days.

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

Park Electrochemical  vs.  Novocure

Park Electrochemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Park Electrochemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Novocure

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Novocure are ranked lower than 3 (%) 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 Park Electrochemical and Novocure

The main advantage of trading using opposite Park Electrochemical and Novocure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Electrochemical 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 Park Electrochemical 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.