Correlation Between Noram Lithium and Lundin Gold

Can any of the company-specific risk be diversified away by investing in both Noram Lithium and Lundin Gold 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 Lundin Gold 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 Lundin Gold, you can compare the effects of market volatilities on Noram Lithium and Lundin Gold 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 Lundin Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Noram Lithium and Lundin Gold.

Diversification Opportunities for Noram Lithium and Lundin Gold

0.26

Correlation Coefficient

Noram Lithium  Lundin Gold

Modest diversification

The 3 months correlation between Noram and Lundin is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Noram Lithium Corp and Lundin Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Gold 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 Lundin Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Gold has no effect on the direction of Noram Lithium i.e., Noram Lithium and Lundin Gold go up and down completely randomly.

Pair Corralation between Noram Lithium and Lundin Gold

Assuming the 90 days horizon Noram Lithium Corp is expected to under-perform the Lundin Gold. In addition to that, Noram Lithium is 2.1 times more volatile than Lundin Gold. It trades about -0.11 of its total potential returns per unit of risk. Lundin Gold is currently generating about 0.0 per unit of volatility. If you would invest  3,492  in Lundin Gold on October 22, 2024 and sell it today you would lose (39.00) from holding Lundin Gold or give up 1.12% of portfolio value over 90 days.

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

Noram Lithium Corp  vs.  Lundin Gold

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. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Lundin Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lundin Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Lundin Gold is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Noram Lithium and Lundin Gold

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

The idea behind Noram Lithium Corp and Lundin Gold 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.