Correlation Between Noram Lithium and Canada Rare

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

Diversification Opportunities for Noram Lithium and Canada Rare

-0.31

Correlation Coefficient

Noram Lithium  Canada Rare

Very good diversification

The 3 months correlation between Noram and Canada is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Noram Lithium Corp and Canada Rare Earth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canada Rare Earth 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 Canada Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canada Rare Earth has no effect on the direction of Noram Lithium i.e., Noram Lithium and Canada Rare go up and down completely randomly.

Pair Corralation between Noram Lithium and Canada Rare

If you would invest  6.40  in Noram Lithium Corp on December 29, 2024 and sell it today you would lose (0.20) from holding Noram Lithium Corp or give up 3.13% of portfolio value over 90 days.

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

Noram Lithium Corp  vs.  Canada Rare Earth

Noram Lithium Corp

Risk-Adjusted Performance

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.

Canada Rare Earth

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Noram Lithium and Canada Rare

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

The idea behind Noram Lithium Corp and Canada Rare Earth 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.