Correlation Between RedFlow and Novonix

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

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

Diversification Opportunities for RedFlow and Novonix

0.28

Correlation Coefficient

RedFlow  Novonix

Modest diversification

The 3 months correlation between RedFlow and Novonix is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding RedFlow Limited and Novonix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novonix and RedFlow 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 RedFlow Limited 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 has no effect on the direction of RedFlow i.e., RedFlow and Novonix go up and down completely randomly.

Pair Corralation between RedFlow and Novonix

Assuming the 90 days horizon RedFlow Limited is expected to generate 13.99 times more return on investment than Novonix. However, RedFlow is 13.99 times more volatile than Novonix. It trades about 0.1 of its potential returns per unit of risk. Novonix is currently generating about 0.01 per unit of risk. If you would invest  8.00  in RedFlow Limited on September 22, 2024 and sell it today you would lose (7.99) from holding RedFlow Limited or give up 99.87% of portfolio value over 90 days.

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

RedFlow Limited  vs.  Novonix

RedFlow Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RedFlow Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, RedFlow reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with RedFlow and Novonix

The main advantage of trading using opposite RedFlow and Novonix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RedFlow 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 RedFlow Limited and Novonix 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.