Correlation Between Sigma Lithium and IperionX Limited
Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and IperionX Limited 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 IperionX Limited 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 IperionX Limited American, you can compare the effects of market volatilities on Sigma Lithium and IperionX Limited 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 IperionX Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and IperionX Limited.
Diversification Opportunities for Sigma Lithium and IperionX Limited
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sigma and IperionX is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and IperionX Limited American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IperionX Limited American 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 IperionX Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IperionX Limited American has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and IperionX Limited go up and down completely randomly.
Pair Corralation between Sigma Lithium and IperionX Limited
Given the investment horizon of 90 days Sigma Lithium is expected to generate 11.05 times less return on investment than IperionX Limited. In addition to that, Sigma Lithium is 1.12 times more volatile than IperionX Limited American. It trades about 0.03 of its total potential returns per unit of risk. IperionX Limited American is currently generating about 0.43 per unit of volatility. If you would invest 2,165 in IperionX Limited American on September 1, 2024 and sell it today you would earn a total of 745.00 from holding IperionX Limited American or generate 34.41% 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. IperionX Limited American
Performance |
| Timeline |
| Sigma Lithium Resources |
| IperionX Limited American |
Sigma Lithium and IperionX Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sigma Lithium and IperionX Limited
The main advantage of trading using opposite Sigma Lithium and IperionX Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, IperionX Limited 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 IperionX Limited will offset losses from the drop in IperionX Limited'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 |
| IperionX Limited vs. NioCorp Developments Ltd | IperionX Limited vs. Teck Resources Ltd | IperionX Limited vs. Sigma Lithium Resources | IperionX Limited vs. MP Materials Corp |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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