Correlation Between Nexans SA and Novonix

Can any of the company-specific risk be diversified away by investing in both Nexans SA and Novonix 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 Nexans SA and Novonix into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nexans SA and Novonix, you can compare the effects of market volatilities on Nexans SA and Novonix 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 Nexans SA with a short position of Novonix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexans SA and Novonix.

Diversification Opportunities for Nexans SA and Novonix

0.47

Correlation Coefficient

Nexans SA  Novonix

Very weak diversification

The 3 months correlation between Nexans and Novonix is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Nexans SA and Novonix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novonix and Nexans SA 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 Nexans SA are associated (or correlated) with Novonix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novonix has no effect on the direction of Nexans SA i.e., Nexans SA and Novonix go up and down completely randomly.

Pair Corralation between Nexans SA and Novonix

Assuming the 90 days horizon Nexans SA is expected to under-perform the Novonix. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nexans SA is 3.31 times less risky than Novonix. The pink sheet trades about -0.29 of its potential returns per unit of risk. The Novonix is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Novonix on October 26, 2024 and sell it today you would lose (15.00) from holding Novonix or give up 28.3% of portfolio value over 90 days.

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

Nexans SA  vs.  Novonix

Nexans SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexans SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Novonix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novonix has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nexans SA and Novonix

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

The idea behind Nexans SA and Novonix 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.