Correlation Between European Metals and Sigma Lithium
Can any of the company-specific risk be diversified away by investing in both European Metals 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 European Metals and Sigma Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Metals Holdings and Sigma Lithium Resources, you can compare the effects of market volatilities on European Metals 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 European Metals with a short position of Sigma Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Sigma Lithium.
Diversification Opportunities for European Metals and Sigma Lithium
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between European and Sigma is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings 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 European Metals 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 European Metals Holdings 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 European Metals i.e., European Metals and Sigma Lithium go up and down completely randomly.
Pair Corralation between European Metals and Sigma Lithium
Assuming the 90 days horizon European Metals Holdings is expected to generate 1.87 times more return on investment than Sigma Lithium. However, European Metals is 1.87 times more volatile than Sigma Lithium Resources. It trades about -0.02 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about -0.05 per unit of risk. If you would invest 33.00 in European Metals Holdings on September 3, 2024 and sell it today you would lose (23.80) from holding European Metals Holdings or give up 72.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Metals Holdings vs. Sigma Lithium Resources
Performance |
| Timeline |
| European Metals Holdings |
| Sigma Lithium Resources |
European Metals and Sigma Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and Sigma Lithium
The main advantage of trading using opposite European Metals and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals 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.| European Metals vs. Qubec Nickel Corp | European Metals vs. IGO Limited | European Metals vs. Avarone Metals | European Metals vs. Adriatic Metals PLC |
| 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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