Correlation Between New Momentum and Novonix
Can any of the company-specific risk be diversified away by investing in both New Momentum 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 New Momentum and Novonix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Momentum and Novonix, you can compare the effects of market volatilities on New Momentum 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 New Momentum with a short position of Novonix. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Momentum and Novonix.
Diversification Opportunities for New Momentum and Novonix
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between New and Novonix is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding New Momentum and Novonix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novonix and New Momentum 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 New Momentum 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 New Momentum i.e., New Momentum and Novonix go up and down completely randomly.
Pair Corralation between New Momentum and Novonix
Given the investment horizon of 90 days New Momentum is expected to generate 2.75 times more return on investment than Novonix. However, New Momentum is 2.75 times more volatile than Novonix. It trades about 0.0 of its potential returns per unit of risk. Novonix is currently generating about -0.1 per unit of risk. If you would invest 0.06 in New Momentum on August 28, 2024 and sell it today you would lose (0.01) from holding New Momentum or give up 16.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Momentum vs. Novonix
Performance |
| Timeline |
| New Momentum |
| Novonix |
New Momentum and Novonix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Momentum and Novonix
The main advantage of trading using opposite New Momentum and Novonix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Momentum 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.| New Momentum vs. SosTravel SPA | New Momentum vs. Arma Services | New Momentum vs. Transat AT | New Momentum vs. Airbnb Inc |
| Novonix vs. FREYR Battery SA | Novonix vs. nVent Electric PLC | Novonix vs. Hubbell | Novonix vs. Advanced Energy Industries |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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