Correlation Between Novonix and Mitsubishi Electric

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

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

Diversification Opportunities for Novonix and Mitsubishi Electric

-0.18

Correlation Coefficient

Novonix  Mitsubishi Electric

Good diversification

The 3 months correlation between Novonix and Mitsubishi is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Novonix and Mitsubishi Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Electric 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 Mitsubishi Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Electric has no effect on the direction of Novonix i.e., Novonix and Mitsubishi Electric go up and down completely randomly.

Pair Corralation between Novonix and Mitsubishi Electric

Assuming the 90 days horizon Novonix is expected to generate 4.26 times more return on investment than Mitsubishi Electric. However, Novonix is 4.26 times more volatile than Mitsubishi Electric. It trades about 0.0 of its potential returns per unit of risk. Mitsubishi Electric is currently generating about 0.01 per unit of risk. If you would invest  47.00  in Novonix on October 1, 2024 and sell it today you would lose (2.00) from holding Novonix or give up 4.26% of portfolio value over 90 days.

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

Novonix  vs.  Mitsubishi Electric

Novonix

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Novonix are ranked lower than 2 (%) 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.

Mitsubishi Electric

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Electric are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Mitsubishi Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Novonix and Mitsubishi Electric

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

The idea behind Novonix and Mitsubishi Electric 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.