Correlation Between Novonix and China Carbon

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

By analyzing existing cross correlation between Novonix and China Carbon Graphit, you can compare the effects of market volatilities on Novonix and China Carbon 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 China Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novonix and China Carbon.

Diversification Opportunities for Novonix and China Carbon

0.0

Correlation Coefficient

Novonix  China Carbon

Pay attention - limited upside

The 3 months correlation between Novonix and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Novonix and China Carbon Graphit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Carbon Graphit 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 are associated (or correlated) with China Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Carbon Graphit has no effect on the direction of Novonix i.e., Novonix and China Carbon go up and down completely randomly.

Pair Corralation between Novonix and China Carbon

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	Flat
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Novonix  vs.  China Carbon Graphit

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.

China Carbon Graphit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Carbon Graphit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, China Carbon is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Novonix and China Carbon

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

The idea behind Novonix and China Carbon Graphit 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.