Correlation Between Noram Lithium and Leading Edge
Can any of the company-specific risk be diversified away by investing in both Noram Lithium and Leading Edge 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 Leading Edge 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 Leading Edge Materials, you can compare the effects of market volatilities on Noram Lithium and Leading Edge 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 Leading Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noram Lithium and Leading Edge.
Diversification Opportunities for Noram Lithium and Leading Edge
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Noram and Leading is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Noram Lithium Corp and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials 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 Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Noram Lithium i.e., Noram Lithium and Leading Edge go up and down completely randomly.
Pair Corralation between Noram Lithium and Leading Edge
Assuming the 90 days horizon Noram Lithium Corp is expected to under-perform the Leading Edge. But the otc stock apears to be less risky and, when comparing its historical volatility, Noram Lithium Corp is 1.1 times less risky than Leading Edge. The otc stock trades about -0.05 of its potential returns per unit of risk. The Leading Edge Materials is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 7.10 in Leading Edge Materials on August 29, 2024 and sell it today you would lose (0.50) from holding Leading Edge Materials or give up 7.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Noram Lithium Corp vs. Leading Edge Materials
Performance |
| Timeline |
| Noram Lithium Corp |
| Leading Edge Materials |
Noram Lithium and Leading Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Noram Lithium and Leading Edge
The main advantage of trading using opposite Noram Lithium and Leading Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Noram Lithium position performs unexpectedly, Leading Edge 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 Leading Edge will offset losses from the drop in Leading Edge's long position.| Noram Lithium vs. Anson Resources Limited | Noram Lithium vs. Aurelia Metals Limited | Noram Lithium vs. Altura Mining Limited | Noram Lithium vs. Australian Vanadium Limited |
| Leading Edge vs. Grid Metals Corp | Leading Edge vs. Fireweed Zinc | Leading Edge vs. First American Silver | Leading Edge vs. Australian Strategic Materials |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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