Correlation Between Magnis Energy and Novonix

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

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

Diversification Opportunities for Magnis Energy and Novonix

-0.65

Correlation Coefficient

Magnis Energy  Novonix

Excellent diversification

The 3 months correlation between Magnis and Novonix is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Magnis Energy Technologies 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 Magnis Energy 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 Magnis Energy Technologies 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 Magnis Energy i.e., Magnis Energy and Novonix go up and down completely randomly.

Pair Corralation between Magnis Energy and Novonix

Assuming the 90 days horizon Magnis Energy Technologies is expected to generate 3.38 times more return on investment than Novonix. However, Magnis Energy is 3.38 times more volatile than Novonix Ltd ADR. It trades about 0.1 of its potential returns per unit of risk. Novonix Ltd ADR is currently generating about -0.09 per unit of risk. If you would invest  2.50  in Magnis Energy Technologies on December 29, 2024 and sell it today you would earn a total of  0.65  from holding Magnis Energy Technologies or generate 26.0% return on investment over 90 days.

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

Magnis Energy Technologies  vs.  Novonix Ltd ADR

Magnis Energy Techno

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magnis Energy Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Magnis Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Novonix Ltd ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Novonix Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Magnis Energy and Novonix

The main advantage of trading using opposite Magnis Energy and Novonix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnis Energy 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 Magnis Energy Technologies 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.