Correlation Between Foraco International and Sigma Lithium
Can any of the company-specific risk be diversified away by investing in both Foraco International 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 Foraco International and Sigma Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foraco International SA and Sigma Lithium Resources, you can compare the effects of market volatilities on Foraco International 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 Foraco International with a short position of Sigma Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foraco International and Sigma Lithium.
Diversification Opportunities for Foraco International and Sigma Lithium
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Foraco and Sigma is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Foraco International SA 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 Foraco International 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 Foraco International SA 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 Foraco International i.e., Foraco International and Sigma Lithium go up and down completely randomly.
Pair Corralation between Foraco International and Sigma Lithium
Assuming the 90 days trading horizon Foraco International SA is expected to generate 0.98 times more return on investment than Sigma Lithium. However, Foraco International SA is 1.02 times less risky than Sigma Lithium. It trades about 0.04 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about -0.13 per unit of risk. If you would invest 221.00 in Foraco International SA on September 15, 2024 and sell it today you would earn a total of 4.00 from holding Foraco International SA or generate 1.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Foraco International SA vs. Sigma Lithium Resources
Performance |
| Timeline |
| Foraco International |
| Sigma Lithium Resources |
Foraco International and Sigma Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foraco International and Sigma Lithium
The main advantage of trading using opposite Foraco International and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foraco International 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.| Foraco International vs. Geodrill Limited | Foraco International vs. Major Drilling Group | Foraco International vs. Bri Chem Corp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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