Correlation Between Sigma Lithium and Lake Resources
Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and Lake Resources 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 Lake Resources 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 Lake Resources NL, you can compare the effects of market volatilities on Sigma Lithium and Lake Resources 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 Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and Lake Resources.
Diversification Opportunities for Sigma Lithium and Lake Resources
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sigma and Lake is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Lake Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Resources NL 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 Lake Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Resources NL has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Lake Resources go up and down completely randomly.
Pair Corralation between Sigma Lithium and Lake Resources
Given the investment horizon of 90 days Sigma Lithium Resources is expected to under-perform the Lake Resources. But the stock apears to be less risky and, when comparing its historical volatility, Sigma Lithium Resources is 3.63 times less risky than Lake Resources. The stock trades about -0.04 of its potential returns per unit of risk. The Lake Resources NL is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3.27 in Lake Resources NL on September 13, 2024 and sell it today you would lose (0.77) from holding Lake Resources NL or give up 23.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sigma Lithium Resources vs. Lake Resources NL
Performance |
| Timeline |
| Sigma Lithium Resources |
| Lake Resources NL |
Sigma Lithium and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sigma Lithium and Lake Resources
The main advantage of trading using opposite Sigma Lithium and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Lake Resources 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 Lake Resources will offset losses from the drop in Lake Resources' 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 |
| Lake Resources vs. Entegris | Lake Resources vs. EMCOR Group | Lake Resources vs. RBC Bearings Incorporated | Lake Resources vs. MagnaChip Semiconductor |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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