Correlation Between Novonix and Magnis Energy

Can any of the company-specific risk be diversified away by investing in both Novonix and Magnis Energy 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 Magnis Energy 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 Magnis Energy Technologies, you can compare the effects of market volatilities on Novonix and Magnis Energy 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 Magnis Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novonix and Magnis Energy.

Diversification Opportunities for Novonix and Magnis Energy

-0.63

Correlation Coefficient

Novonix  Magnis Energy

Excellent diversification

The 3 months correlation between Novonix and Magnis is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Novonix Ltd ADR and Magnis Energy Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magnis Energy Techno 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 Magnis Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magnis Energy Techno has no effect on the direction of Novonix i.e., Novonix and Magnis Energy go up and down completely randomly.

Pair Corralation between Novonix and Magnis Energy

Considering the 90-day investment horizon Novonix Ltd ADR is expected to under-perform the Magnis Energy. But the stock apears to be less risky and, when comparing its historical volatility, Novonix Ltd ADR is 3.35 times less risky than Magnis Energy. The stock trades about -0.13 of its potential returns per unit of risk. The Magnis Energy Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Magnis Energy Technologies on December 30, 2024 and sell it today you would earn a total of  0.24  from holding Magnis Energy Technologies or generate 9.6% return on investment over 90 days.

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

Novonix Ltd ADR  vs.  Magnis Energy Technologies

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.

Magnis Energy Techno

Risk-Adjusted Performance

Modest

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

Pair Trading with Novonix and Magnis Energy

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

The idea behind Novonix Ltd ADR and Magnis Energy 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.