Correlation Between Noram Lithium and Stallion Gold
Can any of the company-specific risk be diversified away by investing in both Noram Lithium and Stallion Gold 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 Stallion Gold 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 Stallion Gold Corp, you can compare the effects of market volatilities on Noram Lithium and Stallion Gold 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 Stallion Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noram Lithium and Stallion Gold.
Diversification Opportunities for Noram Lithium and Stallion Gold
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Noram and Stallion is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Noram Lithium Corp and Stallion Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stallion Gold Corp 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 Stallion Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stallion Gold Corp has no effect on the direction of Noram Lithium i.e., Noram Lithium and Stallion Gold go up and down completely randomly.
Pair Corralation between Noram Lithium and Stallion Gold
Assuming the 90 days horizon Noram Lithium Corp is expected to under-perform the Stallion Gold. But the stock apears to be less risky and, when comparing its historical volatility, Noram Lithium Corp is 1.16 times less risky than Stallion Gold. The stock trades about -0.03 of its potential returns per unit of risk. The Stallion Gold Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 9.00 in Stallion Gold Corp on September 2, 2024 and sell it today you would lose (5.00) from holding Stallion Gold Corp or give up 55.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Noram Lithium Corp vs. Stallion Gold Corp
Performance |
| Timeline |
| Noram Lithium Corp |
| Stallion Gold Corp |
Noram Lithium and Stallion Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Noram Lithium and Stallion Gold
The main advantage of trading using opposite Noram Lithium and Stallion Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noram Lithium position performs unexpectedly, Stallion Gold 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 Stallion Gold will offset losses from the drop in Stallion Gold's long position.The idea behind Noram Lithium Corp and Stallion Gold Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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