Correlation Between Powerstorm Holdings and Novonix

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

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

Diversification Opportunities for Powerstorm Holdings and Novonix

-0.04

Correlation Coefficient

Powerstorm Holdings  Novonix

Good diversification

The 3 months correlation between Powerstorm and Novonix is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Powerstorm Holdings and Novonix Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novonix Ltd ADR and Powerstorm Holdings 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 Powerstorm Holdings 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 Ltd ADR has no effect on the direction of Powerstorm Holdings i.e., Powerstorm Holdings and Novonix go up and down completely randomly.

Pair Corralation between Powerstorm Holdings and Novonix

Given the investment horizon of 90 days Powerstorm Holdings is expected to under-perform the Novonix. But the pink sheet apears to be less risky and, when comparing its historical volatility, Powerstorm Holdings is 1.01 times less risky than Novonix. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Novonix Ltd ADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  143.00  in Novonix Ltd ADR on September 22, 2024 and sell it today you would earn a total of  21.00  from holding Novonix Ltd ADR or generate 14.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Powerstorm Holdings  vs.  Novonix Ltd ADR

Powerstorm Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Powerstorm Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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.

Pair Trading with Powerstorm Holdings and Novonix

The main advantage of trading using opposite Powerstorm Holdings and Novonix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Powerstorm Holdings 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 Powerstorm Holdings and Novonix Ltd ADR 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.