Correlation Between American Lithium and Norra Metals

Can any of the company-specific risk be diversified away by investing in both American Lithium and Norra Metals 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 American Lithium and Norra Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Lithium Minerals and Norra Metals Corp, you can compare the effects of market volatilities on American Lithium and Norra Metals 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 American Lithium with a short position of Norra Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Lithium and Norra Metals.

Diversification Opportunities for American Lithium and Norra Metals

0.0

Correlation Coefficient

American Lithium  Norra Metals

Pay attention - limited upside

The 3 months correlation between American and Norra is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding American Lithium Minerals and Norra Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norra Metals Corp and American 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 American Lithium Minerals are associated (or correlated) with Norra Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norra Metals Corp has no effect on the direction of American Lithium i.e., American Lithium and Norra Metals go up and down completely randomly.

Pair Corralation between American Lithium and Norra Metals

If you would invest  1.85  in American Lithium Minerals on December 29, 2024 and sell it today you would earn a total of  0.71  from holding American Lithium Minerals or generate 38.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

American Lithium Minerals  vs.  Norra Metals Corp

American Lithium Minerals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Lithium Minerals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting essential indicators, American Lithium displayed solid returns over the last few months and may actually be approaching a breakup point.

Norra Metals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Norra Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Norra Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Lithium and Norra Metals

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

The idea behind American Lithium Minerals and Norra Metals 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.