Correlation Between US GoldMining and Sigma Lithium
Can any of the company-specific risk be diversified away by investing in both US GoldMining 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 US GoldMining and Sigma Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US GoldMining Warrant and Sigma Lithium Resources, you can compare the effects of market volatilities on US GoldMining 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 US GoldMining with a short position of Sigma Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of US GoldMining and Sigma Lithium.
Diversification Opportunities for US GoldMining and Sigma Lithium
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between USGOW and Sigma is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding US GoldMining Warrant 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 US GoldMining 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 US GoldMining Warrant 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 US GoldMining i.e., US GoldMining and Sigma Lithium go up and down completely randomly.
Pair Corralation between US GoldMining and Sigma Lithium
Assuming the 90 days horizon US GoldMining Warrant is expected to generate 4.77 times more return on investment than Sigma Lithium. However, US GoldMining is 4.77 times more volatile than Sigma Lithium Resources. It trades about 0.17 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about -0.03 per unit of risk. If you would invest 120.00 in US GoldMining Warrant on August 25, 2024 and sell it today you would earn a total of 60.00 from holding US GoldMining Warrant or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US GoldMining Warrant vs. Sigma Lithium Resources
Performance |
| Timeline |
| US GoldMining Warrant |
| Sigma Lithium Resources |
US GoldMining and Sigma Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US GoldMining and Sigma Lithium
The main advantage of trading using opposite US GoldMining and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US GoldMining 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.| US GoldMining vs. Vale SA ADR | US GoldMining vs. Teck Resources Ltd | US GoldMining vs. MP Materials Corp | US GoldMining vs. BHP Group Limited |
| 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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