Correlation Between Ads Tec and Novonix

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

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

Diversification Opportunities for Ads Tec and Novonix

0.62

Correlation Coefficient

Ads Tec  Novonix

Poor diversification

The 3 months correlation between Ads and Novonix is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ads Tec Energy and Novonix Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novonix Ltd ADR and Ads Tec 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 Ads Tec Energy are associated (or correlated) with Novonix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novonix Ltd ADR has no effect on the direction of Ads Tec i.e., Ads Tec and Novonix go up and down completely randomly.

Pair Corralation between Ads Tec and Novonix

Given the investment horizon of 90 days Ads Tec Energy is expected to under-perform the Novonix. But the stock apears to be less risky and, when comparing its historical volatility, Ads Tec Energy is 6.87 times less risky than Novonix. The stock trades about -0.04 of its potential returns per unit of risk. The Novonix Ltd ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  204.00  in Novonix Ltd ADR on August 30, 2024 and sell it today you would lose (6.00) from holding Novonix Ltd ADR or give up 2.94% of portfolio value over 90 days.

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

Ads Tec Energy  vs.  Novonix Ltd ADR

Ads Tec Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ads Tec Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Ads Tec may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Novonix Ltd ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Novonix Ltd ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Novonix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ads Tec and Novonix

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

The idea behind Ads Tec Energy and Novonix Ltd ADR 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.