Correlation Between Novonix and NeoVolta Common

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

By analyzing existing cross correlation between Novonix and NeoVolta Common Stock, you can compare the effects of market volatilities on Novonix and NeoVolta Common 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 NeoVolta Common. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novonix and NeoVolta Common.

Diversification Opportunities for Novonix and NeoVolta Common

0.26

Correlation Coefficient

Novonix  NeoVolta Common

Modest diversification

The 3 months correlation between Novonix and NeoVolta is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Novonix and NeoVolta Common Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeoVolta Common Stock 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 NeoVolta Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeoVolta Common Stock has no effect on the direction of Novonix i.e., Novonix and NeoVolta Common go up and down completely randomly.

Pair Corralation between Novonix and NeoVolta Common

Assuming the 90 days horizon Novonix is expected to generate 1.68 times less return on investment than NeoVolta Common. In addition to that, Novonix is 1.24 times more volatile than NeoVolta Common Stock. It trades about 0.08 of its total potential returns per unit of risk. NeoVolta Common Stock is currently generating about 0.17 per unit of volatility. If you would invest  303.00  in NeoVolta Common Stock on September 2, 2024 and sell it today you would earn a total of  206.00  from holding NeoVolta Common Stock or generate 67.99% return on investment over 90 days.

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

Novonix  vs.  NeoVolta Common Stock

Novonix

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Novonix are ranked lower than 6 (%) 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.

NeoVolta Common Stock

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NeoVolta Common Stock are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, NeoVolta Common showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novonix and NeoVolta Common

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

The idea behind Novonix and NeoVolta Common Stock 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.