Correlation Between Argentina Lithium and Noram Lithium

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

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

Diversification Opportunities for Argentina Lithium and Noram Lithium

0.29

Correlation Coefficient

Argentina Lithium  Noram Lithium

Modest diversification

The 3 months correlation between Argentina and Noram is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Argentina Lithium Energy 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 Argentina 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 Argentina Lithium Energy 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 Argentina Lithium i.e., Argentina Lithium and Noram Lithium go up and down completely randomly.

Pair Corralation between Argentina Lithium and Noram Lithium

Assuming the 90 days horizon Argentina Lithium Energy is expected to generate 1.41 times more return on investment than Noram Lithium. However, Argentina Lithium is 1.41 times more volatile than Noram Lithium Corp. It trades about 0.02 of its potential returns per unit of risk. Noram Lithium Corp is currently generating about -0.03 per unit of risk. If you would invest  31.00  in Argentina Lithium Energy on February 5, 2024 and sell it today you would lose (5.00) from holding Argentina Lithium Energy or give up 16.13% of portfolio value over 90 days.

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

Argentina Lithium Energy  vs.  Noram Lithium Corp

Argentina Lithium Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Argentina Lithium Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Argentina Lithium is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Noram Lithium Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Noram Lithium Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Noram Lithium may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Argentina Lithium and Noram Lithium

The main advantage of trading using opposite Argentina Lithium and Noram Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Argentina Lithium 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 Argentina Lithium Energy 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.