Correlation Between Sigma Lithium and Falcon Energy
Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and Falcon Energy 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 Sigma Lithium and Falcon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sigma Lithium Resources and Falcon Energy Materials, you can compare the effects of market volatilities on Sigma Lithium and Falcon Energy 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 Sigma Lithium with a short position of Falcon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and Falcon Energy.
Diversification Opportunities for Sigma Lithium and Falcon Energy
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sigma and Falcon is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Falcon Energy Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Energy Materials and Sigma Lithium 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 Sigma Lithium Resources are associated (or correlated) with Falcon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Energy Materials has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Falcon Energy go up and down completely randomly.
Pair Corralation between Sigma Lithium and Falcon Energy
Assuming the 90 days trading horizon Sigma Lithium Resources is expected to under-perform the Falcon Energy. But the stock apears to be less risky and, when comparing its historical volatility, Sigma Lithium Resources is 1.26 times less risky than Falcon Energy. The stock trades about 0.0 of its potential returns per unit of risk. The Falcon Energy Materials is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 72.00 in Falcon Energy Materials on August 26, 2024 and sell it today you would earn a total of 15.00 from holding Falcon Energy Materials or generate 20.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sigma Lithium Resources vs. Falcon Energy Materials
Performance |
| Timeline |
| Sigma Lithium Resources |
| Falcon Energy Materials |
Sigma Lithium and Falcon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sigma Lithium and Falcon Energy
The main advantage of trading using opposite Sigma Lithium and Falcon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Falcon Energy 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 Falcon Energy will offset losses from the drop in Falcon Energy's long position.The idea behind Sigma Lithium Resources and Falcon Energy Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Falcon Energy vs. Teck Resources Limited | Falcon Energy vs. Ivanhoe Mines | Falcon Energy vs. Filo Mining Corp | Falcon Energy vs. Sigma Lithium Resources |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |