Correlation Between Sigma Lithium and NioCorp Developments
Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and NioCorp Developments 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 NioCorp Developments 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 NioCorp Developments Ltd, you can compare the effects of market volatilities on Sigma Lithium and NioCorp Developments 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 NioCorp Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and NioCorp Developments.
Diversification Opportunities for Sigma Lithium and NioCorp Developments
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sigma and NioCorp is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments 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 NioCorp Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NioCorp Developments has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and NioCorp Developments go up and down completely randomly.
Pair Corralation between Sigma Lithium and NioCorp Developments
Given the investment horizon of 90 days Sigma Lithium Resources is expected to generate 1.05 times more return on investment than NioCorp Developments. However, Sigma Lithium is 1.05 times more volatile than NioCorp Developments Ltd. It trades about -0.03 of its potential returns per unit of risk. NioCorp Developments Ltd is currently generating about -0.4 per unit of risk. If you would invest 1,486 in Sigma Lithium Resources on August 27, 2024 and sell it today you would lose (61.00) from holding Sigma Lithium Resources or give up 4.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sigma Lithium Resources vs. NioCorp Developments Ltd
Performance |
| Timeline |
| Sigma Lithium Resources |
| NioCorp Developments |
Sigma Lithium and NioCorp Developments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sigma Lithium and NioCorp Developments
The main advantage of trading using opposite Sigma Lithium and NioCorp Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, NioCorp Developments 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 NioCorp Developments will offset losses from the drop in NioCorp Developments' 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 |
| NioCorp Developments vs. Vale SA ADR | NioCorp Developments vs. Teck Resources Ltd | NioCorp Developments vs. BHP Group Limited | NioCorp Developments vs. Glencore PLC ADR |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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