Correlation Between Sigma Lithium and Vale SA
Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and Vale SA 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 Vale SA 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 Vale SA ADR, you can compare the effects of market volatilities on Sigma Lithium and Vale SA 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 Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and Vale SA.
Diversification Opportunities for Sigma Lithium and Vale SA
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sigma and Vale is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Vale SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA ADR 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA ADR has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Vale SA go up and down completely randomly.
Pair Corralation between Sigma Lithium and Vale SA
Given the investment horizon of 90 days Sigma Lithium Resources is expected to generate 3.54 times more return on investment than Vale SA. However, Sigma Lithium is 3.54 times more volatile than Vale SA ADR. It trades about 0.04 of its potential returns per unit of risk. Vale SA ADR is currently generating about -0.03 per unit of risk. If you would invest 1,117 in Sigma Lithium Resources on October 24, 2024 and sell it today you would earn a total of 21.00 from holding Sigma Lithium Resources or generate 1.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sigma Lithium Resources vs. Vale SA ADR
Performance |
| Timeline |
| Sigma Lithium Resources |
| Vale SA ADR |
Sigma Lithium and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sigma Lithium and Vale SA
The main advantage of trading using opposite Sigma Lithium and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Vale SA 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 Vale SA will offset losses from the drop in Vale SA'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 |
| Vale SA vs. BHP Group Limited | Vale SA vs. Teck Resources Ltd | Vale SA vs. Lithium Americas Corp | Vale SA 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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