Correlation Between Northrop Grumman and Novocure
Can any of the company-specific risk be diversified away by investing in both Northrop Grumman 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 Northrop Grumman and Novocure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrop Grumman and Novocure, you can compare the effects of market volatilities on Northrop Grumman 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 Northrop Grumman with a short position of Novocure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrop Grumman and Novocure.
Diversification Opportunities for Northrop Grumman and Novocure
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Northrop and Novocure is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman and Novocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novocure and Northrop Grumman 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 Northrop Grumman 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 Northrop Grumman i.e., Northrop Grumman and Novocure go up and down completely randomly.
Pair Corralation between Northrop Grumman and Novocure
Considering the 90-day investment horizon Northrop Grumman is expected to generate 0.37 times more return on investment than Novocure. However, Northrop Grumman is 2.69 times less risky than Novocure. It trades about 0.17 of its potential returns per unit of risk. Novocure is currently generating about -0.17 per unit of risk. If you would invest 46,636 in Northrop Grumman on February 2, 2024 and sell it today you would earn a total of 2,001 from holding Northrop Grumman or generate 4.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.65% |
Values | Daily Returns |
Northrop Grumman vs. Novocure
Performance |
Timeline |
Northrop Grumman |
Novocure |
Northrop Grumman and Novocure Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Northrop Grumman and Novocure
The main advantage of trading using opposite Northrop Grumman and Novocure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrop Grumman 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.Northrop Grumman vs. Lockheed Martin | Northrop Grumman vs. General Dynamics | Northrop Grumman vs. Raytheon Technologies Corp | Northrop Grumman vs. Huntington Ingalls Industries |
Novocure vs. Senseonics Holdings | Novocure vs. Bionano Genomics | Novocure vs. Jaguar Animal Health | Novocure vs. Foresight Autonomous Holdings |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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