Correlation Between NVent Electric and Novonix
Can any of the company-specific risk be diversified away by investing in both NVent Electric 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 NVent Electric and Novonix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between nVent Electric PLC and Novonix Ltd ADR, you can compare the effects of market volatilities on NVent Electric 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 NVent Electric with a short position of Novonix. Check out your portfolio center. Please also check ongoing floating volatility patterns of NVent Electric and Novonix.
Diversification Opportunities for NVent Electric and Novonix
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NVent and Novonix is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding nVent Electric PLC 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 NVent Electric 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 nVent Electric PLC 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 NVent Electric i.e., NVent Electric and Novonix go up and down completely randomly.
Pair Corralation between NVent Electric and Novonix
Considering the 90-day investment horizon nVent Electric PLC is expected to generate 0.4 times more return on investment than Novonix. However, nVent Electric PLC is 2.51 times less risky than Novonix. It trades about 0.08 of its potential returns per unit of risk. Novonix Ltd ADR is currently generating about -0.02 per unit of risk. If you would invest 3,821 in nVent Electric PLC on August 26, 2024 and sell it today you would earn a total of 4,013 from holding nVent Electric PLC or generate 105.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
nVent Electric PLC vs. Novonix Ltd ADR
Performance |
| Timeline |
| nVent Electric PLC |
| Novonix Ltd ADR |
NVent Electric and Novonix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NVent Electric and Novonix
The main advantage of trading using opposite NVent Electric and Novonix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVent Electric 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.| NVent Electric vs. Hubbell | NVent Electric vs. Advanced Energy Industries | NVent Electric vs. Vertiv Holdings Co | NVent Electric vs. Energizer Holdings |
| Novonix vs. Magnis Energy Technologies | Novonix vs. Exro Technologies | Novonix vs. Ilika plc | Novonix vs. FuelPositive Corp |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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