Correlation Between Largo Resources and Sigma Lithium
Can any of the company-specific risk be diversified away by investing in both Largo Resources 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 Largo Resources and Sigma Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Largo Resources and Sigma Lithium Resources, you can compare the effects of market volatilities on Largo Resources 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 Largo Resources with a short position of Sigma Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Largo Resources and Sigma Lithium.
Diversification Opportunities for Largo Resources and Sigma Lithium
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Largo and Sigma is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Largo Resources 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 Largo Resources 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 Largo Resources 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 Largo Resources i.e., Largo Resources and Sigma Lithium go up and down completely randomly.
Pair Corralation between Largo Resources and Sigma Lithium
Considering the 90-day investment horizon Largo Resources is expected to generate 0.99 times more return on investment than Sigma Lithium. However, Largo Resources is 1.01 times less risky than Sigma Lithium. It trades about -0.02 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about -0.03 per unit of risk. If you would invest 482.00 in Largo Resources on August 29, 2024 and sell it today you would lose (265.00) from holding Largo Resources or give up 54.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Largo Resources vs. Sigma Lithium Resources
Performance |
| Timeline |
| Largo Resources |
| Sigma Lithium Resources |
Largo Resources and Sigma Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Largo Resources and Sigma Lithium
The main advantage of trading using opposite Largo Resources and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Largo Resources 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.| Largo Resources vs. Skeena Resources | Largo Resources vs. Materion | Largo Resources vs. Compass Minerals International | Largo Resources vs. IperionX Limited American |
| 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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