Correlation Between Rock Tech and Sigma Lithium

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

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

Diversification Opportunities for Rock Tech and Sigma Lithium

0.29

Correlation Coefficient

Rock Tech  Sigma Lithium

Modest diversification

The 3 months correlation between Rock and Sigma is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Rock Tech Lithium 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 Rock Tech 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 Rock Tech Lithium 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 Rock Tech i.e., Rock Tech and Sigma Lithium go up and down completely randomly.

Pair Corralation between Rock Tech and Sigma Lithium

Assuming the 90 days horizon Rock Tech Lithium is expected to under-perform the Sigma Lithium. In addition to that, Rock Tech is 1.62 times more volatile than Sigma Lithium Resources. It trades about -0.29 of its total potential returns per unit of risk. Sigma Lithium Resources is currently generating about -0.36 per unit of volatility. If you would invest  1,940  in Sigma Lithium Resources on September 20, 2024 and sell it today you would lose (366.00) from holding Sigma Lithium Resources or give up 18.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Rock Tech Lithium  vs.  Sigma Lithium Resources

Rock Tech Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rock Tech Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Sigma Lithium Resources

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable primary indicators, Sigma Lithium is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Rock Tech and Sigma Lithium

The main advantage of trading using opposite Rock Tech and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rock Tech 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 Rock Tech Lithium 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.