Correlation Between Sherritt International and Noram Lithium
Can any of the company-specific risk be diversified away by investing in both Sherritt International and Noram 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 Sherritt International and Noram Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sherritt International and Noram Lithium Corp, you can compare the effects of market volatilities on Sherritt International and Noram 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 Sherritt International with a short position of Noram Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sherritt International and Noram Lithium.
Diversification Opportunities for Sherritt International and Noram Lithium
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sherritt and Noram is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sherritt International and Noram Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noram Lithium Corp and Sherritt International 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 Sherritt International are associated (or correlated) with Noram Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noram Lithium Corp has no effect on the direction of Sherritt International i.e., Sherritt International and Noram Lithium go up and down completely randomly.
Pair Corralation between Sherritt International and Noram Lithium
Given the investment horizon of 90 days Sherritt International is expected to under-perform the Noram Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Sherritt International is 2.31 times less risky than Noram Lithium. The stock trades about -0.13 of its potential returns per unit of risk. The Noram Lithium Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 12.00 in Noram Lithium Corp on September 3, 2024 and sell it today you would earn a total of 1.00 from holding Noram Lithium Corp or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sherritt International vs. Noram Lithium Corp
Performance |
| Timeline |
| Sherritt International |
| Noram Lithium Corp |
Sherritt International and Noram Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sherritt International and Noram Lithium
The main advantage of trading using opposite Sherritt International and Noram Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sherritt International position performs unexpectedly, Noram 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 Noram Lithium will offset losses from the drop in Noram Lithium's long position.| Sherritt International vs. HudBay Minerals | Sherritt International vs. Lundin Mining | Sherritt International vs. First Quantum Minerals | Sherritt International vs. Ivanhoe Mines |
| Noram Lithium vs. Algoma Steel Group | Noram Lithium vs. Champion Iron | Noram Lithium vs. International Zeolite Corp | Noram Lithium vs. European Residential Real |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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