Correlation Between Ilika Plc and Novonix

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

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

Diversification Opportunities for Ilika Plc and Novonix

-0.47

Correlation Coefficient

Ilika Plc  Novonix

Very good diversification

The 3 months correlation between Ilika and Novonix is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ilika plc 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 Ilika Plc 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 Ilika plc 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 Ilika Plc i.e., Ilika Plc and Novonix go up and down completely randomly.

Pair Corralation between Ilika Plc and Novonix

Assuming the 90 days horizon Ilika plc is expected to under-perform the Novonix. But the otc stock apears to be less risky and, when comparing its historical volatility, Ilika plc is 1.65 times less risky than Novonix. The otc stock trades about -0.05 of its potential returns per unit of risk. The Novonix Ltd ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  169.00  in Novonix Ltd ADR on August 30, 2024 and sell it today you would earn a total of  29.00  from holding Novonix Ltd ADR or generate 17.16% return on investment over 90 days.

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

Ilika plc  vs.  Novonix Ltd ADR

Ilika plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ilika plc 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 forward-looking signals remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 Ilika Plc and Novonix

The main advantage of trading using opposite Ilika Plc and Novonix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ilika Plc 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 Ilika plc 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 Global Correlations module to find global opportunities by holding instruments from different markets.