Correlation Between Emerita Resources and Sigma Lithium

Can any of the company-specific risk be diversified away by investing in both Emerita 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 Emerita 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 Emerita Resources Corp and Sigma Lithium Resources, you can compare the effects of market volatilities on Emerita 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 Emerita Resources with a short position of Sigma Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerita Resources and Sigma Lithium.

Diversification Opportunities for Emerita Resources and Sigma Lithium

-0.75

Correlation Coefficient

Emerita Resources  Sigma Lithium

Pay attention - limited upside

The 3 months correlation between Emerita and Sigma is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Emerita Resources Corp 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 Emerita 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 Emerita Resources Corp 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 Emerita Resources i.e., Emerita Resources and Sigma Lithium go up and down completely randomly.

Pair Corralation between Emerita Resources and Sigma Lithium

Assuming the 90 days horizon Emerita Resources Corp is expected to generate 3.25 times more return on investment than Sigma Lithium. However, Emerita Resources is 3.25 times more volatile than Sigma Lithium Resources. It trades about 0.41 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about -0.35 per unit of risk. If you would invest  70.00  in Emerita Resources Corp on October 1, 2024 and sell it today you would earn a total of  47.00  from holding Emerita Resources Corp or generate 67.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Emerita Resources Corp  vs.  Sigma Lithium Resources

Emerita Resources Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emerita Resources Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Emerita Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Sigma Lithium Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sigma Lithium Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Sigma Lithium is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Emerita Resources and Sigma Lithium

The main advantage of trading using opposite Emerita Resources and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerita 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.

The idea behind Emerita Resources Corp and Sigma Lithium Resources 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.