Correlation Between Royal Bank and Sigma Lithium
Can any of the company-specific risk be diversified away by investing in both Royal Bank 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 Royal Bank and Sigma Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Bank of and Sigma Lithium Resources, you can compare the effects of market volatilities on Royal Bank 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 Royal Bank with a short position of Sigma Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Sigma Lithium.
Diversification Opportunities for Royal Bank and Sigma Lithium
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Royal and Sigma is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of 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 Royal Bank 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 Royal Bank of 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 Royal Bank i.e., Royal Bank and Sigma Lithium go up and down completely randomly.
Pair Corralation between Royal Bank and Sigma Lithium
Assuming the 90 days trading horizon Royal Bank of is expected to generate 0.09 times more return on investment than Sigma Lithium. However, Royal Bank of is 10.66 times less risky than Sigma Lithium. It trades about 0.07 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about -0.04 per unit of risk. If you would invest 2,529 in Royal Bank of on August 25, 2024 and sell it today you would earn a total of 13.00 from holding Royal Bank of or generate 0.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royal Bank of vs. Sigma Lithium Resources
Performance |
| Timeline |
| Royal Bank |
| Sigma Lithium Resources |
Royal Bank and Sigma Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Sigma Lithium
The main advantage of trading using opposite Royal Bank and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank 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.| Royal Bank vs. Forstrong Global Income | Royal Bank vs. BMO Aggregate Bond | Royal Bank vs. Terreno Resources Corp | Royal Bank vs. iShares Canadian HYBrid |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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