Correlation Between Noram Lithium and Argentina Lithium
Can any of the company-specific risk be diversified away by investing in both Noram Lithium and Argentina Lithium 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 Noram Lithium and Argentina Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Noram Lithium Corp and Argentina Lithium Energy, you can compare the effects of market volatilities on Noram Lithium and Argentina Lithium 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 Noram Lithium with a short position of Argentina Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noram Lithium and Argentina Lithium.
Diversification Opportunities for Noram Lithium and Argentina Lithium
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Noram and Argentina is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Noram Lithium Corp and Argentina Lithium Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argentina Lithium Energy and Noram Lithium 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 Noram Lithium Corp are associated (or correlated) with Argentina Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argentina Lithium Energy has no effect on the direction of Noram Lithium i.e., Noram Lithium and Argentina Lithium go up and down completely randomly.
Pair Corralation between Noram Lithium and Argentina Lithium
Assuming the 90 days horizon Noram Lithium Corp is expected to under-perform the Argentina Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Noram Lithium Corp is 1.36 times less risky than Argentina Lithium. The stock trades about -0.07 of its potential returns per unit of risk. The Argentina Lithium Energy is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 18.00 in Argentina Lithium Energy on August 30, 2024 and sell it today you would lose (1.00) from holding Argentina Lithium Energy or give up 5.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Noram Lithium Corp vs. Argentina Lithium Energy
Performance |
| Timeline |
| Noram Lithium Corp |
| Argentina Lithium Energy |
Noram Lithium and Argentina Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Noram Lithium and Argentina Lithium
The main advantage of trading using opposite Noram Lithium and Argentina Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noram Lithium position performs unexpectedly, Argentina Lithium 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 Argentina Lithium will offset losses from the drop in Argentina Lithium's long position.| Noram Lithium vs. First Majestic Silver | Noram Lithium vs. Ivanhoe Energy | Noram Lithium vs. Orezone Gold Corp | Noram Lithium vs. Faraday Copper Corp |
| Argentina Lithium vs. Lithium Chile | Argentina Lithium vs. International Lithium Corp | Argentina Lithium vs. Noram Lithium Corp | Argentina Lithium vs. Imagine Lithium |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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