Correlation Between Sigma Lithium and Lithium Americas
Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and Lithium Americas 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 Lithium Americas 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 Lithium Americas Corp, you can compare the effects of market volatilities on Sigma Lithium and Lithium Americas 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 Lithium Americas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and Lithium Americas.
Diversification Opportunities for Sigma Lithium and Lithium Americas
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sigma and Lithium is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas 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 Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Lithium Americas go up and down completely randomly.
Pair Corralation between Sigma Lithium and Lithium Americas
Given the investment horizon of 90 days Sigma Lithium Resources is expected to under-perform the Lithium Americas. But the stock apears to be less risky and, when comparing its historical volatility, Sigma Lithium Resources is 1.24 times less risky than Lithium Americas. The stock trades about -0.22 of its potential returns per unit of risk. The Lithium Americas Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 306.00 in Lithium Americas Corp on November 3, 2024 and sell it today you would lose (6.00) from holding Lithium Americas Corp or give up 1.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sigma Lithium Resources vs. Lithium Americas Corp
Performance |
| Timeline |
| Sigma Lithium Resources |
| Lithium Americas Corp |
Sigma Lithium and Lithium Americas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sigma Lithium and Lithium Americas
The main advantage of trading using opposite Sigma Lithium and Lithium Americas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Lithium Americas 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 Lithium Americas will offset losses from the drop in Lithium Americas' 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 |
| Lithium Americas vs. Sigma Lithium Resources | Lithium Americas vs. Standard Lithium | Lithium Americas vs. Sayona Mining Limited | Lithium Americas 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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