Panic-selling over COVID-19, the illness caused by a novel coronavirus, has created a lot of turbulence in the markets. Even stocks that probably won't be affected by the disease have been hit. And the stock market has been incredibly volatile, with mini-crashes and then huge gains.

Part of the problem is our inability to understand, with specificity, how dangerous this disease is to humanity. Is it going to be like the Black Death or the 1918 influenza pandemic -- or more like Y2K, with the crisis averted? We still don't know.

Thought bubble containing dozens of words related to the COVID-19 coronavirus outbreak

Image source: Getty Images.

What we know about this coronavirus

The World Health Organization (WHO) estimates the confirmed fatality rate for COVID-19 is  3.4%, which is 30 times higher than the flu. 

Ebola's fatality rate ranged from 25% to 90%, depending on the outbreak. MERS had a fatality rate of 35%; SARS was 10%. Ironically, these high fatality rates make these diseases less contagious because most people die before they can transmit the disease. While a high percentage of people are killed from those diseases, the number of deaths is quite low because few people contract the disease.

It's the low fatality rate of COVID-19 that makes it potentially much more dangerous. If it's more like the flu than Ebola, that's not good for humanity. After all, the flu, with its 0.1% fatality rate, kills hundreds of thousands of people worldwide each year.

That's why my family owns Novavax (NVAX 8.40%), a company that has a flu vaccine (NanoFlu) in phase 3 trials. Flu is a dangerous killer, and (so far, anyway) NanoFlu has proven to be a more effective vaccine than anything on the market. In addition to its flu vaccine, Novavax has a vaccine for COVID-19 that it plans to start testing on people in the second quarter. So COVID-19 hasn't been bad news for this stock -- quite the opposite.

But for most companies, COVID-19 is a largely unknown variable. How dangerous is this disease? We still don't know how contagious it is. Also, the fatality rate might shrink if SARS-CoV-2 (the novel coronavirus) mutates, or people build up immunities.

Meanwhile, here are two COVID-19-related stocks to keep on a watch list. One stock has fallen dramatically and might fall even more. The other stock has risen dramatically and might go up even higher. Or both stocks might reverse course. For now, investors probably ought to keep some cash on the sidelines and wait for more information.

It's too early to buy cruise lines

My favorite cruise line is Royal Caribbean (RCL -0.53%). The COVID-19 epidemic has absolutely hammered the stock; it's down 49% for the year.

Normally, Royal Caribbean has no trouble trouncing the S&P 500. There was a brutal sell-off back in 2008, because of the housing crisis. What did the housing crisis have to do with cruise lines? Not much, really. People often go on vacations when economic times are good, and they avoid vacations when times are bad. So Royal Caribbean was hit hard, and then it bounced back. It's a wonderful stock, and in ordinary times it's a wonderful investment.

The problem is that COVID-19 is particularly bad for cruise lines. These ships carry a lot of people in a confined space, and if a disease breaks out, there's nowhere to hide. The Diamond Princess cruise ship owned by Carnival Corp. (CCL 0.13%) had an outbreak on board, and 705 of 3,711 passengers tested positive for SARS-CoV-2. So far, six passengers have died.

Of course, this negative publicity has been bad for business. A cruise line in Japan was forced to declare bankruptcy when it was hit with a wave of cancellations. What's really concerning is the nature of this business: Cruise lines carry a lot of debt. Royal Caribbean has $11.8 billion in debt, and only $243 million in cash; Carnival has similar debt loads. If business is bad for a year or two, their stocks could really get hammered.

Should we buy Co-Diagnostics?

An intriguing stock has come into view in the midst of the COVID-19 outbreak. Co-Diagnostics (CODX 0.89%), a former micro-cap, emerged from obscurity to return an amazing 1,495% to investors in the first two months of 2020.

Co-Diagnostics, based in Utah, is a stock you want to keep an eye on because it's perhaps the most effective hedge against the coronavirus in the entire stock market. Unlike all the biotechs doing research and development on vaccines and treatments, Co-Diagnostics has a helpful product in the here and now.

The company recently received emergency approval from the Food and Drug Administration that will allow it to start selling its diagnostic kits for SARS-CoV-2. CEO Dwight Egan said, "We believe this change will allow the diagnostics industry to respond to the developing situation much more rapidly and effectively, and we applaud the FDA for taking such aggressive action to address the coronavirus outbreak."

Despite this good news, it's an open question how quickly this tiny diagnostic company can turn the approval into meaningful sales numbers. Co-Diagnostics had less than $1 million in revenue in 2019, so its $400 million market cap is very high, to put it mildly. A lot of this good news has already been priced into the stock.

On the other hand, it's certainly true that Co-Diagnostics has been a powerful hedge against a stock-market meltdown due to COVID-19. Risk-tolerant investors ought to keep this small company on a watch list, as we wait and see how prolonged this epidemic is.