Correlation Between Insulet and Novocure

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

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

Diversification Opportunities for Insulet and Novocure

0.37

Correlation Coefficient

Insulet  Novocure

Weak diversification

The 3 months correlation between Insulet and Novocure is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Insulet and Novocure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novocure and Insulet 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 Insulet 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 Insulet i.e., Insulet and Novocure go up and down completely randomly.

Pair Corralation between Insulet and Novocure

Given the investment horizon of 90 days Insulet is expected to generate 2.72 times less return on investment than Novocure. But when comparing it to its historical volatility, Insulet is 2.24 times less risky than Novocure. It trades about 0.1 of its potential returns per unit of risk. Novocure is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,418  in Novocure on February 7, 2024 and sell it today you would earn a total of  137.00  from holding Novocure or generate 9.66% return on investment over 90 days.

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

Insulet  vs.  Novocure

Insulet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Insulet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators 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

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Novocure are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Novocure may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Insulet and Novocure

The main advantage of trading using opposite Insulet and Novocure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insulet 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 Insulet 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.