Correlation Between Sigma Lithium and Newport Gold
Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and Newport Gold 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 Newport Gold 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 Newport Gold, you can compare the effects of market volatilities on Sigma Lithium and Newport Gold 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 Newport Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and Newport Gold.
Diversification Opportunities for Sigma Lithium and Newport Gold
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sigma and Newport is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Newport Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newport Gold 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 Newport Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newport Gold has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Newport Gold go up and down completely randomly.
Pair Corralation between Sigma Lithium and Newport Gold
Given the investment horizon of 90 days Sigma Lithium is expected to generate 45.87 times less return on investment than Newport Gold. But when comparing it to its historical volatility, Sigma Lithium Resources is 9.09 times less risky than Newport Gold. It trades about 0.03 of its potential returns per unit of risk. Newport Gold is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 0.16 in Newport Gold on September 1, 2024 and sell it today you would earn a total of 0.11 from holding Newport Gold or generate 68.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sigma Lithium Resources vs. Newport Gold
Performance |
| Timeline |
| Sigma Lithium Resources |
| Newport Gold |
Sigma Lithium and Newport Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sigma Lithium and Newport Gold
The main advantage of trading using opposite Sigma Lithium and Newport Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Newport Gold 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 Newport Gold will offset losses from the drop in Newport Gold'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 |
| Newport Gold vs. Callinex Mines | Newport Gold vs. NioCorp Developments Ltd | Newport Gold vs. Lithium Americas Corp | Newport Gold vs. Sigma Lithium Resources |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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