Correlation Between Novocure and Ducommun Incorporated

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

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

Diversification Opportunities for Novocure and Ducommun Incorporated

-0.25

Correlation Coefficient

Novocure  Ducommun Incorporated

Very good diversification

The 3 months correlation between Novocure and Ducommun is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Novocure and Ducommun Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducommun Incorporated and Novocure 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 Novocure are associated (or correlated) with Ducommun Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducommun Incorporated has no effect on the direction of Novocure i.e., Novocure and Ducommun Incorporated go up and down completely randomly.

Pair Corralation between Novocure and Ducommun Incorporated

Given the investment horizon of 90 days Novocure is expected to generate 2.5 times more return on investment than Ducommun Incorporated. However, Novocure is 2.5 times more volatile than Ducommun Incorporated. It trades about 0.05 of its potential returns per unit of risk. Ducommun Incorporated is currently generating about 0.07 per unit of risk. If you would invest  1,272  in Novocure on July 12, 2024 and sell it today you would earn a total of  194.00  from holding Novocure or generate 15.25% return on investment over 90 days.

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

Novocure  vs.  Ducommun Incorporated

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 weak performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in November 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Ducommun Incorporated

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ducommun Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Ducommun Incorporated may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Novocure and Ducommun Incorporated

The main advantage of trading using opposite Novocure and Ducommun Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novocure position performs unexpectedly, Ducommun Incorporated 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 Ducommun Incorporated will offset losses from the drop in Ducommun Incorporated's long position.

The idea behind Novocure and Ducommun Incorporated 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.