Correlation Between Pacific Imperial and Noram Lithium

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

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

Diversification Opportunities for Pacific Imperial and Noram Lithium

-0.25

Correlation Coefficient

Pacific Imperial  Noram Lithium

Very good diversification

The 3 months correlation between Pacific and Noram is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Imperial Mines 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 Pacific Imperial 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 Pacific Imperial Mines 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 Pacific Imperial i.e., Pacific Imperial and Noram Lithium go up and down completely randomly.

Pair Corralation between Pacific Imperial and Noram Lithium

Assuming the 90 days horizon Pacific Imperial Mines is expected to generate 4.82 times more return on investment than Noram Lithium. However, Pacific Imperial is 4.82 times more volatile than Noram Lithium Corp. It trades about 0.18 of its potential returns per unit of risk. Noram Lithium Corp is currently generating about -0.45 per unit of risk. If you would invest  1.00  in Pacific Imperial Mines on September 23, 2024 and sell it today you would earn a total of  0.50  from holding Pacific Imperial Mines or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Pacific Imperial Mines  vs.  Noram Lithium Corp

Pacific Imperial Mines

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Imperial Mines are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pacific Imperial showed 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. 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Pacific Imperial and Noram Lithium

The main advantage of trading using opposite Pacific Imperial and Noram Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Imperial 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 Pacific Imperial Mines 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..