Correlation Between Sigma Lithium and Core Lithium
Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and Core 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 Core 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 Core Lithium, you can compare the effects of market volatilities on Sigma Lithium and Core 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 Core Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and Core Lithium.
Diversification Opportunities for Sigma Lithium and Core Lithium
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sigma and Core is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Core Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Lithium 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 Core Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Lithium has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Core Lithium go up and down completely randomly.
Pair Corralation between Sigma Lithium and Core Lithium
Given the investment horizon of 90 days Sigma Lithium Resources is expected to generate 0.25 times more return on investment than Core Lithium. However, Sigma Lithium Resources is 3.94 times less risky than Core Lithium. It trades about -0.12 of its potential returns per unit of risk. Core Lithium is currently generating about -0.1 per unit of risk. If you would invest 1,359 in Sigma Lithium Resources on September 13, 2024 and sell it today you would lose (139.00) from holding Sigma Lithium Resources or give up 10.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sigma Lithium Resources vs. Core Lithium
Performance |
| Timeline |
| Sigma Lithium Resources |
| Core Lithium |
Sigma Lithium and Core Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sigma Lithium and Core Lithium
The main advantage of trading using opposite Sigma Lithium and Core Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Core 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 Core Lithium will offset losses from the drop in Core Lithium's long position.| Sigma Lithium vs. Piedmont Lithium Ltd | Sigma Lithium vs. Standard Lithium | Sigma Lithium vs. MP Materials Corp | Sigma Lithium vs. Vale SA ADR |
| Core Lithium vs. Qubec Nickel Corp | Core Lithium vs. IGO Limited | Core Lithium vs. Focus Graphite | Core Lithium vs. Mineral Res |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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