Correlation Between Novonix and FREYR Battery
Can any of the company-specific risk be diversified away by investing in both Novonix and FREYR Battery 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 FREYR Battery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Novonix Ltd ADR and FREYR Battery SA, you can compare the effects of market volatilities on Novonix and FREYR Battery 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 FREYR Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novonix and FREYR Battery.
Diversification Opportunities for Novonix and FREYR Battery
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Novonix and FREYR is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Novonix Ltd ADR and FREYR Battery SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FREYR Battery SA 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 Ltd ADR are associated (or correlated) with FREYR Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FREYR Battery SA has no effect on the direction of Novonix i.e., Novonix and FREYR Battery go up and down completely randomly.
Pair Corralation between Novonix and FREYR Battery
Considering the 90-day investment horizon Novonix Ltd ADR is expected to under-perform the FREYR Battery. But the stock apears to be less risky and, when comparing its historical volatility, Novonix Ltd ADR is 1.59 times less risky than FREYR Battery. The stock trades about -0.23 of its potential returns per unit of risk. The FREYR Battery SA is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 183.00 in FREYR Battery SA on December 4, 2024 and sell it today you would lose (30.00) from holding FREYR Battery SA or give up 16.39% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.33% |
Values | Daily Returns |
Novonix Ltd ADR vs. FREYR Battery SA
Performance |
Timeline |
Novonix Ltd ADR |
FREYR Battery SA |
Novonix and FREYR Battery Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Novonix and FREYR Battery
The main advantage of trading using opposite Novonix and FREYR Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novonix position performs unexpectedly, FREYR Battery 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 FREYR Battery will offset losses from the drop in FREYR Battery's long position.Novonix vs. Magnis Energy Technologies | Novonix vs. Exro Technologies | Novonix vs. Ilika plc | Novonix vs. FuelPositive Corp |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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