Correlation Between China Carbon and Novonix

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

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

Diversification Opportunities for China Carbon and Novonix

0.0

Correlation Coefficient

China Carbon  Novonix

Pay attention - limited upside

The 3 months correlation between China and Novonix is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Carbon Graphit and Novonix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novonix and China Carbon 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 China Carbon Graphit 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 has no effect on the direction of China Carbon i.e., China Carbon and Novonix go up and down completely randomly.

Pair Corralation between China Carbon and Novonix

If you would invest  38.00  in Novonix on September 12, 2024 and sell it today you would earn a total of  2.00  from holding Novonix or generate 5.26% return on investment over 90 days.

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

China Carbon Graphit  vs.  Novonix

China Carbon Graphit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Carbon Graphit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, China Carbon is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Novonix

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Novonix are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Novonix reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Carbon and Novonix

The main advantage of trading using opposite China Carbon and Novonix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Carbon 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 China Carbon Graphit and Novonix 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.

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 the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.