Correlation Between Novocure and Air Industries

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

By analyzing existing cross correlation between Novocure and Air Industries Group, you can compare the effects of market volatilities on Novocure and Air Industries 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 Air Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novocure and Air Industries.

Diversification Opportunities for Novocure and Air Industries

-0.55

Correlation Coefficient

Novocure  Air Industries

Excellent diversification

The 3 months correlation between Novocure and Air is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Novocure and Air Industries Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Industries Group 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 Air Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Industries Group has no effect on the direction of Novocure i.e., Novocure and Air Industries go up and down completely randomly.

Pair Corralation between Novocure and Air Industries

Given the investment horizon of 90 days Novocure is expected to generate 3.94 times more return on investment than Air Industries. However, Novocure is 3.94 times more volatile than Air Industries Group. It trades about 0.34 of its potential returns per unit of risk. Air Industries Group is currently generating about -0.07 per unit of risk. If you would invest  1,657  in Novocure on September 15, 2024 and sell it today you would earn a total of  1,684  from holding Novocure or generate 101.63% return on investment over 90 days.

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

Novocure  vs.  Air Industries Group

Novocure

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Novocure are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Novocure reported solid returns over the last few months and may actually be approaching a breakup point.

Air Industries Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Industries Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Novocure and Air Industries

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

The idea behind Novocure and Air Industries Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.