Correlation Between Teck Resources and Sigma Lithium
Can any of the company-specific risk be diversified away by investing in both Teck Resources and Sigma Lithium 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 Teck Resources and Sigma Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teck Resources Limited and Sigma Lithium Resources, you can compare the effects of market volatilities on Teck Resources and Sigma Lithium 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 Teck Resources with a short position of Sigma Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teck Resources and Sigma Lithium.
Diversification Opportunities for Teck Resources and Sigma Lithium
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Teck and Sigma is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Teck Resources Limited and Sigma Lithium Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigma Lithium Resources and Teck Resources 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 Teck Resources Limited are associated (or correlated) with Sigma Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sigma Lithium Resources has no effect on the direction of Teck Resources i.e., Teck Resources and Sigma Lithium go up and down completely randomly.
Pair Corralation between Teck Resources and Sigma Lithium
Assuming the 90 days trading horizon Teck Resources Limited is expected to generate 0.49 times more return on investment than Sigma Lithium. However, Teck Resources Limited is 2.02 times less risky than Sigma Lithium. It trades about 0.06 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about -0.05 per unit of risk. If you would invest 5,081 in Teck Resources Limited on August 26, 2024 and sell it today you would earn a total of 1,462 from holding Teck Resources Limited or generate 28.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teck Resources Limited vs. Sigma Lithium Resources
Performance |
| Timeline |
| Teck Resources |
| Sigma Lithium Resources |
Teck Resources and Sigma Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teck Resources and Sigma Lithium
The main advantage of trading using opposite Teck Resources and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teck Resources position performs unexpectedly, Sigma Lithium 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 Sigma Lithium will offset losses from the drop in Sigma Lithium's long position.| Teck Resources vs. First Quantum Minerals | Teck Resources vs. Nutrien | Teck Resources vs. Lundin Mining | Teck Resources vs. Wheaton Precious Metals |
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.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |