Correlation Between Sigma Lithium and Sayona Mining
Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and Sayona Mining 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 Sayona Mining 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 Sayona Mining Limited, you can compare the effects of market volatilities on Sigma Lithium and Sayona Mining 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 Sayona Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and Sayona Mining.
Diversification Opportunities for Sigma Lithium and Sayona Mining
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sigma and Sayona is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Sayona Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sayona Mining Limited 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 Sayona Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sayona Mining Limited has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Sayona Mining go up and down completely randomly.
Pair Corralation between Sigma Lithium and Sayona Mining
Given the investment horizon of 90 days Sigma Lithium Resources is expected to generate 0.45 times more return on investment than Sayona Mining. However, Sigma Lithium Resources is 2.22 times less risky than Sayona Mining. It trades about -0.03 of its potential returns per unit of risk. Sayona Mining Limited is currently generating about -0.02 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 Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sigma Lithium Resources vs. Sayona Mining Limited
Performance |
| Timeline |
| Sigma Lithium Resources |
| Sayona Mining Limited |
Sigma Lithium and Sayona Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sigma Lithium and Sayona Mining
The main advantage of trading using opposite Sigma Lithium and Sayona Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Sayona Mining 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 Sayona Mining will offset losses from the drop in Sayona Mining'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 |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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