Correlation Between Spectral and Novocure

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

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

Diversification Opportunities for Spectral and Novocure

0.03

Correlation Coefficient

Spectral  Novocure

Significant diversification

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

Pair Corralation between Spectral and Novocure

Given the investment horizon of 90 days Spectral AI is expected to under-perform the Novocure. But the stock apears to be less risky and, when comparing its historical volatility, Spectral AI is 1.1 times less risky than Novocure. The stock trades about -0.37 of its potential returns per unit of risk. The Novocure is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest  1,549  in Novocure on January 30, 2024 and sell it today you would lose (285.00) from holding Novocure or give up 18.4% of portfolio value over 90 days.

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

Spectral AI  vs.  Novocure

Spectral AI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectral AI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Novocure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novocure has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Novocure is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Spectral and Novocure

The main advantage of trading using opposite Spectral and Novocure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spectral 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 Spectral AI 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.