Correlation Between Sigma Lithium and InZinc Mining
Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and InZinc Mining 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 InZinc Mining 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 InZinc Mining, you can compare the effects of market volatilities on Sigma Lithium and InZinc Mining 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 InZinc Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and InZinc Mining.
Diversification Opportunities for Sigma Lithium and InZinc Mining
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sigma and InZinc is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and InZinc Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InZinc Mining 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 InZinc Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InZinc Mining has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and InZinc Mining go up and down completely randomly.
Pair Corralation between Sigma Lithium and InZinc Mining
Assuming the 90 days trading horizon Sigma Lithium Resources is expected to under-perform the InZinc Mining. But the stock apears to be less risky and, when comparing its historical volatility, Sigma Lithium Resources is 1.39 times less risky than InZinc Mining. The stock trades about -0.06 of its potential returns per unit of risk. The InZinc Mining is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 74.00 in InZinc Mining on August 29, 2024 and sell it today you would earn a total of 19.00 from holding InZinc Mining or generate 25.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sigma Lithium Resources vs. InZinc Mining
Performance |
| Timeline |
| Sigma Lithium Resources |
| InZinc Mining |
Sigma Lithium and InZinc Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sigma Lithium and InZinc Mining
The main advantage of trading using opposite Sigma Lithium and InZinc Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, InZinc Mining 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 InZinc Mining will offset losses from the drop in InZinc Mining's long position.The idea behind Sigma Lithium Resources and InZinc Mining 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.| InZinc Mining vs. Brunswick Exploration | InZinc Mining vs. Sigma Lithium Resources | InZinc Mining vs. Emerita Resources Corp | InZinc Mining vs. Frontier Lithium |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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