Correlation Between Sigma Lithium and American Lithium
Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and American 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 Sigma Lithium and American Lithium 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 American Lithium Corp, you can compare the effects of market volatilities on Sigma Lithium and American 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 Sigma Lithium with a short position of American Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and American Lithium.
Diversification Opportunities for Sigma Lithium and American Lithium
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sigma and American is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and American Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Lithium Corp 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 American Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Lithium Corp has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and American Lithium go up and down completely randomly.
Pair Corralation between Sigma Lithium and American Lithium
Given the investment horizon of 90 days Sigma Lithium Resources is expected to generate 0.92 times more return on investment than American Lithium. However, Sigma Lithium Resources is 1.09 times less risky than American Lithium. It trades about 0.0 of its potential returns per unit of risk. American Lithium Corp is currently generating about -0.11 per unit of risk. If you would invest 1,415 in Sigma Lithium Resources on August 31, 2024 and sell it today you would lose (26.00) from holding Sigma Lithium Resources or give up 1.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sigma Lithium Resources vs. American Lithium Corp
Performance |
| Timeline |
| Sigma Lithium Resources |
| American Lithium Corp |
Sigma Lithium and American Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sigma Lithium and American Lithium
The main advantage of trading using opposite Sigma Lithium and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, American 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 American Lithium will offset losses from the drop in American Lithium's long position.| Sigma Lithium vs. Piedmont Lithium Ltd | Sigma Lithium vs. Standard Lithium | Sigma Lithium vs. Vale SA ADR | Sigma Lithium vs. BHP Group Limited |
| American Lithium vs. Olympic Steel | American Lithium vs. Kaiser Aluminum | American Lithium vs. Diageo PLC ADR | American Lithium vs. Century Aluminum |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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