Correlation Between Novonix and Zinc8 Energy

Can any of the company-specific risk be diversified away by investing in both Novonix and Zinc8 Energy 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 Zinc8 Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Novonix and Zinc8 Energy Solutions, you can compare the effects of market volatilities on Novonix and Zinc8 Energy 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 Zinc8 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novonix and Zinc8 Energy.

Diversification Opportunities for Novonix and Zinc8 Energy

0.12

Correlation Coefficient

Novonix  Zinc8 Energy

Average diversification

The 3 months correlation between Novonix and Zinc8 is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Novonix and Zinc8 Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zinc8 Energy 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 are associated (or correlated) with Zinc8 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zinc8 Energy Solutions has no effect on the direction of Novonix i.e., Novonix and Zinc8 Energy go up and down completely randomly.

Pair Corralation between Novonix and Zinc8 Energy

Assuming the 90 days horizon Novonix is expected to under-perform the Zinc8 Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Novonix is 5.51 times less risky than Zinc8 Energy. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Zinc8 Energy Solutions is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  135.00  in Zinc8 Energy Solutions on September 22, 2024 and sell it today you would lose (132.30) from holding Zinc8 Energy Solutions or give up 98.0% of portfolio value over 90 days.

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

Novonix  vs.  Zinc8 Energy Solutions

Novonix

Risk-Adjusted Performance

5 of 100

Insignificant

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.

Zinc8 Energy Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zinc8 Energy Solutions 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Novonix and Zinc8 Energy

The main advantage of trading using opposite Novonix and Zinc8 Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Novonix position performs unexpectedly, Zinc8 Energy 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 Zinc8 Energy will offset losses from the drop in Zinc8 Energy's long position.

The idea behind Novonix and Zinc8 Energy 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.