Correlation Between Sigma Lithium and Ramp Metals
Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and Ramp Metals 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 Ramp Metals 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 Ramp Metals, you can compare the effects of market volatilities on Sigma Lithium and Ramp Metals 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 Ramp Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and Ramp Metals.
Diversification Opportunities for Sigma Lithium and Ramp Metals
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sigma and Ramp is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Ramp Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramp Metals 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 Ramp Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramp Metals has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Ramp Metals go up and down completely randomly.
Pair Corralation between Sigma Lithium and Ramp Metals
Assuming the 90 days trading horizon Sigma Lithium Resources is expected to generate 0.98 times more return on investment than Ramp Metals. However, Sigma Lithium Resources is 1.02 times less risky than Ramp Metals. It trades about 0.12 of its potential returns per unit of risk. Ramp Metals is currently generating about 0.08 per unit of risk. If you would invest 1,478 in Sigma Lithium Resources on August 29, 2024 and sell it today you would earn a total of 456.00 from holding Sigma Lithium Resources or generate 30.85% 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. Ramp Metals
Performance |
| Timeline |
| Sigma Lithium Resources |
| Ramp Metals |
Sigma Lithium and Ramp Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sigma Lithium and Ramp Metals
The main advantage of trading using opposite Sigma Lithium and Ramp Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Ramp Metals 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 Ramp Metals will offset losses from the drop in Ramp Metals' long position.The idea behind Sigma Lithium Resources and Ramp Metals 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.| Ramp Metals vs. Teck Resources Limited | Ramp Metals vs. Ivanhoe Mines | Ramp Metals vs. Filo Mining Corp | Ramp Metals 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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