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 Ltd ADR 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

0.87

Correlation Coefficient

Novonix  NeoVolta Common

Very poor diversification

The 3 months correlation between Novonix and NeoVolta is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Novonix Ltd ADR 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 Ltd ADR 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

Considering the 90-day investment horizon Novonix Ltd ADR is expected to generate 0.71 times more return on investment than NeoVolta Common. However, Novonix Ltd ADR is 1.41 times less risky than NeoVolta Common. It trades about -0.13 of its potential returns per unit of risk. NeoVolta Common Stock is currently generating about -0.16 per unit of risk. If you would invest  180.00  in Novonix Ltd ADR on December 30, 2024 and sell it today you would lose (65.00) from holding Novonix Ltd ADR or give up 36.11% of portfolio value over 90 days.

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

Novonix Ltd ADR  vs.  NeoVolta Common Stock

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.

NeoVolta Common Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days NeoVolta Common Stock has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 Ltd ADR 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.