Correlation Between Novonix and Preformed Line

Can any of the company-specific risk be diversified away by investing in both Novonix and Preformed Line 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 Preformed Line 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 Preformed Line Products, you can compare the effects of market volatilities on Novonix and Preformed Line 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 Preformed Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Novonix and Preformed Line.

Diversification Opportunities for Novonix and Preformed Line

-0.44

Correlation Coefficient

Novonix  Preformed Line

Very good diversification

The 3 months correlation between Novonix and Preformed is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Novonix Ltd ADR and Preformed Line Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preformed Line Products 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 Preformed Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preformed Line Products has no effect on the direction of Novonix i.e., Novonix and Preformed Line go up and down completely randomly.

Pair Corralation between Novonix and Preformed Line

Considering the 90-day investment horizon Novonix Ltd ADR is expected to under-perform the Preformed Line. In addition to that, Novonix is 2.46 times more volatile than Preformed Line Products. It trades about -0.02 of its total potential returns per unit of risk. Preformed Line Products is currently generating about 0.11 per unit of volatility. If you would invest  13,825  in Preformed Line Products on May 11, 2025 and sell it today you would earn a total of  2,087  from holding Preformed Line Products or generate 15.1% return on investment over 90 days.

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

Novonix Ltd ADR  vs.  Preformed Line Products

Novonix Ltd ADR

Risk-Adjusted Performance

Weakest

Over the last 90 days Novonix Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Novonix is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Preformed Line Products

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Preformed Line Products are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Preformed Line exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Novonix and Preformed Line

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

The idea behind Novonix Ltd ADR and Preformed Line Products 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.