Correlation Between SIFCO Industries and Novocure

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

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

Diversification Opportunities for SIFCO Industries and Novocure

-0.23

Correlation Coefficient

SIFCO Industries  Novocure

Very good diversification

The 3 months correlation between SIFCO and Novocure is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding SIFCO Industries and Novocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novocure and SIFCO Industries 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 SIFCO Industries 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 SIFCO Industries i.e., SIFCO Industries and Novocure go up and down completely randomly.

Pair Corralation between SIFCO Industries and Novocure

Considering the 90-day investment horizon SIFCO Industries is expected to generate 2.5 times more return on investment than Novocure. However, SIFCO Industries is 2.5 times more volatile than Novocure. It trades about 0.14 of its potential returns per unit of risk. Novocure is currently generating about -0.39 per unit of risk. If you would invest  325.00  in SIFCO Industries on October 22, 2024 and sell it today you would earn a total of  39.00  from holding SIFCO Industries or generate 12.0% return on investment over 90 days.

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

SIFCO Industries  vs.  Novocure

SIFCO Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIFCO Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, SIFCO Industries is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Novocure

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Novocure are ranked lower than 10 (%) 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 SIFCO Industries and Novocure

The main advantage of trading using opposite SIFCO Industries and Novocure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIFCO Industries 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 SIFCO Industries 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.