Correlation Between Novonix and Pioneer Power

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

Diversification Opportunities for Novonix and Pioneer Power

0.91

Correlation Coefficient

Novonix  Pioneer Power

Almost no diversification

The 3 months correlation between Novonix and Pioneer is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Novonix Ltd ADR and Pioneer Power Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Power Solutions 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 Pioneer Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Power Solutions has no effect on the direction of Novonix i.e., Novonix and Pioneer Power go up and down completely randomly.

Pair Corralation between Novonix and Pioneer Power

Considering the 90-day investment horizon Novonix Ltd ADR is expected to under-perform the Pioneer Power. In addition to that, Novonix is 1.65 times more volatile than Pioneer Power Solutions. It trades about -0.09 of its total potential returns per unit of risk. Pioneer Power Solutions is currently generating about -0.15 per unit of volatility. If you would invest  415.00  in Pioneer Power Solutions on December 29, 2024 and sell it today you would lose (104.00) from holding Pioneer Power Solutions or give up 25.06% of portfolio value over 90 days.

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

Novonix Ltd ADR  vs.  Pioneer Power Solutions

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.

Pioneer Power Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pioneer Power Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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 recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Novonix and Pioneer Power

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

The idea behind Novonix Ltd ADR and Pioneer Power Solutions 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.