Correlation Between Novonix and Exro Technologies

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

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

Diversification Opportunities for Novonix and Exro Technologies

0.73

Correlation Coefficient

Novonix  Exro Technologies

Poor diversification

The 3 months correlation between Novonix and Exro is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Novonix and Exro Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exro Technologies and Novonix 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 Novonix are associated (or correlated) with Exro Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exro Technologies has no effect on the direction of Novonix i.e., Novonix and Exro Technologies go up and down completely randomly.

Pair Corralation between Novonix and Exro Technologies

Assuming the 90 days horizon Novonix is expected to under-perform the Exro Technologies. But the pink sheet apears to be less risky and, when comparing its historical volatility, Novonix is 1.12 times less risky than Exro Technologies. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Exro Technologies is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  8.50  in Exro Technologies on December 30, 2024 and sell it today you would lose (1.70) from holding Exro Technologies or give up 20.0% of portfolio value over 90 days.

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

Novonix  vs.  Exro Technologies

Novonix

Risk-Adjusted Performance

Very Weak

Over the last 90 days Novonix 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 basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Exro Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exro Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Novonix and Exro Technologies

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

The idea behind Novonix and Exro Technologies 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.