Correlation Between Northrop Grumman and Coda Octopus

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Can any of the company-specific risk be diversified away by investing in both Northrop Grumman and Coda Octopus 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 Coda Octopus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrop Grumman and Coda Octopus Group, you can compare the effects of market volatilities on Northrop Grumman and Coda Octopus 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 Coda Octopus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrop Grumman and Coda Octopus.

Diversification Opportunities for Northrop Grumman and Coda Octopus

-0.64
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Northrop and Coda Octopus is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman and Coda Octopus Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coda Octopus Group 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 Coda Octopus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coda Octopus Group has no effect on the direction of Northrop Grumman i.e., Northrop Grumman and Coda Octopus go up and down completely randomly.

Pair Corralation between Northrop Grumman and Coda Octopus

Considering the 90-day investment horizon Northrop Grumman is expected to generate 0.67 times more return on investment than Coda Octopus. However, Northrop Grumman is 1.49 times less risky than Coda Octopus. It trades about 0.05 of its potential returns per unit of risk. Coda Octopus Group is currently generating about 0.01 per unit of risk. If you would invest  35,000  in Northrop Grumman on October 30, 2022 and sell it today you would earn a total of  8,765  from holding Northrop Grumman or generate 25.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.68%
ValuesDaily Returns

Northrop Grumman  vs.  Coda Octopus Group

 Performance (%) 
       Timeline  
Northrop Grumman 
Northrop Performance
0 of 100
Over the last 90 days Northrop Grumman 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 somewhat strong which may send shares a bit higher in February 2023. The current disturbance may also be a sign of long term up-swing for the company investors.

Northrop Price Channel

Coda Octopus Group 
Coda Octopus Performance
15 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Coda Octopus Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Coda Octopus sustained solid returns over the last few months and may actually be approaching a breakup point.

Coda Octopus Price Channel

Northrop Grumman and Coda Octopus Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Northrop Grumman and Coda Octopus

The main advantage of trading using opposite Northrop Grumman and Coda Octopus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrop Grumman position performs unexpectedly, Coda Octopus 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 Coda Octopus will offset losses from the drop in Coda Octopus' long position.
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The idea behind Northrop Grumman and Coda Octopus 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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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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