Correlation Between Imagine Lithium and Noram Lithium

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

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

Diversification Opportunities for Imagine Lithium and Noram Lithium

-0.09

Correlation Coefficient

Imagine Lithium  Noram Lithium

Good diversification

The 3 months correlation between Imagine and Noram is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Imagine Lithium 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 Imagine 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 Imagine Lithium 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 Imagine Lithium i.e., Imagine Lithium and Noram Lithium go up and down completely randomly.

Pair Corralation between Imagine Lithium and Noram Lithium

Assuming the 90 days horizon Imagine Lithium is expected to generate 4.07 times more return on investment than Noram Lithium. However, Imagine Lithium is 4.07 times more volatile than Noram Lithium Corp. It trades about 0.11 of its potential returns per unit of risk. Noram Lithium Corp is currently generating about 0.06 per unit of risk. If you would invest  2.00  in Imagine Lithium on December 30, 2024 and sell it today you would earn a total of  0.50  from holding Imagine Lithium or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Imagine Lithium  vs.  Noram Lithium Corp

Imagine Lithium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Imagine Lithium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Imagine Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

Noram Lithium Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Noram Lithium Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Noram Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Imagine Lithium and Noram Lithium

The main advantage of trading using opposite Imagine Lithium and Noram Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imagine Lithium 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.

The idea behind Imagine Lithium and Noram Lithium 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.