Correlation Between Castellum and Sigma Labs

Can any of the company-specific risk be diversified away by investing in both Castellum and Sigma Labs 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 Castellum and Sigma Labs into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Castellum and Sigma Labs, you can compare the effects of market volatilities on Castellum and Sigma Labs 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 Castellum with a short position of Sigma Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Castellum and Sigma Labs.

Diversification Opportunities for Castellum and Sigma Labs

-0.29

Correlation Coefficient

Castellum  Sigma Labs

Very good diversification

The 3 months correlation between Castellum and Sigma is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Castellum and Sigma Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigma Labs and Castellum 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 Castellum are associated (or correlated) with Sigma Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sigma Labs has no effect on the direction of Castellum i.e., Castellum and Sigma Labs go up and down completely randomly.

Pair Corralation between Castellum and Sigma Labs

If you would invest  17.00  in Castellum on September 3, 2024 and sell it today you would earn a total of  9.00  from holding Castellum or generate 52.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Castellum  vs.  Sigma Labs

Castellum

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Castellum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Castellum displayed solid returns over the last few months and may actually be approaching a breakup point.

Sigma Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sigma Labs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Sigma Labs is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Castellum and Sigma Labs

The main advantage of trading using opposite Castellum and Sigma Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Castellum position performs unexpectedly, Sigma Labs 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 Labs will offset losses from the drop in Sigma Labs' long position.

The idea behind Castellum and Sigma Labs pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.