Correlation Between Electra Battery and Sigma Lithium
Can any of the company-specific risk be diversified away by investing in both Electra Battery and Sigma 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 Electra Battery and Sigma Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electra Battery Materials and Sigma Lithium Resources, you can compare the effects of market volatilities on Electra Battery and Sigma 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 Electra Battery with a short position of Sigma Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electra Battery and Sigma Lithium.
Diversification Opportunities for Electra Battery and Sigma Lithium
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Electra and Sigma is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials and Sigma Lithium Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigma Lithium Resources and Electra Battery 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 Electra Battery Materials are associated (or correlated) with Sigma Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sigma Lithium Resources has no effect on the direction of Electra Battery i.e., Electra Battery and Sigma Lithium go up and down completely randomly.
Pair Corralation between Electra Battery and Sigma Lithium
Given the investment horizon of 90 days Electra Battery Materials is expected to under-perform the Sigma Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Electra Battery Materials is 1.3 times less risky than Sigma Lithium. The stock trades about -0.14 of its potential returns per unit of risk. The Sigma Lithium Resources is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 1,486 in Sigma Lithium Resources on August 27, 2024 and sell it today you would lose (91.00) from holding Sigma Lithium Resources or give up 6.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electra Battery Materials vs. Sigma Lithium Resources
Performance |
| Timeline |
| Electra Battery Materials |
| Sigma Lithium Resources |
Electra Battery and Sigma Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electra Battery and Sigma Lithium
The main advantage of trading using opposite Electra Battery and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electra Battery position performs unexpectedly, Sigma 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 Sigma Lithium will offset losses from the drop in Sigma Lithium's long position.| Electra Battery vs. Vale SA ADR | Electra Battery vs. Teck Resources Ltd | Electra Battery vs. MP Materials Corp | Electra Battery vs. BHP Group Limited |
| Sigma Lithium vs. Piedmont Lithium Ltd | Sigma Lithium vs. Standard Lithium | Sigma Lithium vs. MP Materials Corp | Sigma Lithium vs. Vale SA ADR |
Check out your portfolio center.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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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