Correlation Between MetLife and Noram Lithium

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

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

Diversification Opportunities for MetLife and Noram Lithium

-0.58

Correlation Coefficient

MetLife  Noram Lithium

Excellent diversification

The 3 months correlation between MetLife and Noram is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding MetLife 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 MetLife 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 MetLife 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 MetLife i.e., MetLife and Noram Lithium go up and down completely randomly.

Pair Corralation between MetLife and Noram Lithium

Considering the 90-day investment horizon MetLife is expected to generate 2.2 times less return on investment than Noram Lithium. But when comparing it to its historical volatility, MetLife is 5.93 times less risky than Noram Lithium. It trades about 0.14 of its potential returns per unit of risk. Noram Lithium Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8.10  in Noram Lithium Corp on September 3, 2024 and sell it today you would earn a total of  0.90  from holding Noram Lithium Corp or generate 11.11% return on investment over 90 days.

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

MetLife  vs.  Noram Lithium Corp

MetLife

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, MetLife unveiled solid returns over the last few months and may actually be approaching a breakup point.

Noram Lithium Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with MetLife and Noram Lithium

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

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.