Correlation Between Novonix and Furukawa Electric

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

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

Diversification Opportunities for Novonix and Furukawa Electric

-0.13

Correlation Coefficient

Novonix  Furukawa Electric

Good diversification

The 3 months correlation between Novonix and Furukawa is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Novonix Ltd ADR and Furukawa Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Furukawa 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 Ltd ADR are associated (or correlated) with Furukawa Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Furukawa Electric has no effect on the direction of Novonix i.e., Novonix and Furukawa Electric go up and down completely randomly.

Pair Corralation between Novonix and Furukawa Electric

Considering the 90-day investment horizon Novonix Ltd ADR is expected to under-perform the Furukawa Electric. In addition to that, Novonix is 2.11 times more volatile than Furukawa Electric Co. It trades about -0.01 of its total potential returns per unit of risk. Furukawa Electric Co is currently generating about 0.1 per unit of volatility. If you would invest  2,710  in Furukawa Electric Co on September 23, 2024 and sell it today you would earn a total of  1,090  from holding Furukawa Electric Co or generate 40.22% return on investment over 90 days.

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

Novonix Ltd ADR  vs.  Furukawa Electric Co

Novonix Ltd ADR

Risk-Adjusted Performance

5 of 100

Modest

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

Furukawa Electric

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Furukawa Electric Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Furukawa Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novonix and Furukawa Electric

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

The idea behind Novonix Ltd ADR and Furukawa Electric Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.