Correlation Between Hydrogen Engine and Novonix

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

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

Diversification Opportunities for Hydrogen Engine and Novonix

0.2

Correlation Coefficient

Hydrogen Engine  Novonix

Modest diversification

The 3 months correlation between Hydrogen and Novonix is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hydrogen Engine Center and Novonix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novonix and Hydrogen Engine 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 Hydrogen Engine Center 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 Hydrogen Engine i.e., Hydrogen Engine and Novonix go up and down completely randomly.

Pair Corralation between Hydrogen Engine and Novonix

Given the investment horizon of 90 days Hydrogen Engine is expected to generate 1.01 times less return on investment than Novonix. In addition to that, Hydrogen Engine is 2.79 times more volatile than Novonix. It trades about 0.02 of its total potential returns per unit of risk. Novonix is currently generating about 0.06 per unit of volatility. If you would invest  37.00  in Novonix on September 23, 2024 and sell it today you would earn a total of  6.00  from holding Novonix or generate 16.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Hydrogen Engine Center  vs.  Novonix

Hydrogen Engine Center

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hydrogen Engine Center are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Hydrogen Engine reported solid returns over the last few months and may actually be approaching a breakup point.

Novonix

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Novonix are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Novonix reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hydrogen Engine and Novonix

The main advantage of trading using opposite Hydrogen Engine and Novonix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hydrogen Engine 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 Hydrogen Engine Center 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.