Correlation Between Canada Rare and Norra Metals

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

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

Diversification Opportunities for Canada Rare and Norra Metals

0.0

Correlation Coefficient

Canada Rare  Norra Metals

Pay attention - limited upside

The 3 months correlation between Canada and Norra is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Canada Rare Earth and Norra Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norra Metals Corp and Canada Rare 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 Canada Rare Earth are associated (or correlated) with Norra Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norra Metals Corp has no effect on the direction of Canada Rare i.e., Canada Rare and Norra Metals go up and down completely randomly.

Pair Corralation between Canada Rare and Norra Metals

Assuming the 90 days horizon Canada Rare is expected to generate 2.01 times less return on investment than Norra Metals. But when comparing it to its historical volatility, Canada Rare Earth is 2.95 times less risky than Norra Metals. It trades about 0.11 of its potential returns per unit of risk. Norra Metals Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Norra Metals Corp on October 9, 2024 and sell it today you would lose (0.50) from holding Norra Metals Corp or give up 33.33% of portfolio value over 90 days.

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

Canada Rare Earth  vs.  Norra Metals Corp

Canada Rare Earth

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canada Rare Earth are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Canada Rare reported solid returns over the last few months and may actually be approaching a breakup point.

Norra Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Canada Rare and Norra Metals

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

The idea behind Canada Rare Earth and Norra Metals 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 Commodity Directory module to find actively traded commodities issued by global exchanges.