Correlation Between Treace Medical and Novocure

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

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

Diversification Opportunities for Treace Medical and Novocure

-0.09

Correlation Coefficient

Treace Medical  Novocure

Good diversification

The 3 months correlation between Treace and Novocure is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Treace Medical Concepts and Novocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novocure and Treace Medical 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 Treace Medical Concepts 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 Treace Medical i.e., Treace Medical and Novocure go up and down completely randomly.

Pair Corralation between Treace Medical and Novocure

Given the investment horizon of 90 days Treace Medical Concepts is expected to generate 0.76 times more return on investment than Novocure. However, Treace Medical Concepts is 1.32 times less risky than Novocure. It trades about -0.2 of its potential returns per unit of risk. Novocure is currently generating about -0.15 per unit of risk. If you would invest  970.00  in Treace Medical Concepts on December 28, 2024 and sell it today you would lose (125.00) from holding Treace Medical Concepts or give up 12.89% of portfolio value over 90 days.

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

Treace Medical Concepts  vs.  Novocure

Treace Medical Concepts

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Treace Medical Concepts are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Treace Medical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Treace Medical and Novocure

The main advantage of trading using opposite Treace Medical and Novocure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treace Medical 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 Treace Medical Concepts 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.