Correlation Between Novonix and NeoVolta Warrant

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

Diversification Opportunities for Novonix and NeoVolta Warrant

0.8

Correlation Coefficient

Novonix  NeoVolta Warrant

Very poor diversification

The 3 months correlation between Novonix and NeoVolta is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Novonix Ltd ADR and NeoVolta Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeoVolta Warrant 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 Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeoVolta Warrant has no effect on the direction of Novonix i.e., Novonix and NeoVolta Warrant go up and down completely randomly.

Pair Corralation between Novonix and NeoVolta Warrant

Considering the 90-day investment horizon Novonix Ltd ADR is expected to under-perform the NeoVolta Warrant. But the stock apears to be less risky and, when comparing its historical volatility, Novonix Ltd ADR is 2.34 times less risky than NeoVolta Warrant. The stock trades about -0.13 of its potential returns per unit of risk. The NeoVolta Warrant is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  188.00  in NeoVolta Warrant on December 30, 2024 and sell it today you would lose (88.00) from holding NeoVolta Warrant or give up 46.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Novonix Ltd ADR  vs.  NeoVolta Warrant

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 Warrant

Risk-Adjusted Performance

Very Weak

Over the last 90 days NeoVolta Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal 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 Warrant

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

The idea behind Novonix Ltd ADR and NeoVolta Warrant 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.