Correlation Between Sigma Lithium and Brunswick Exploration

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

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

Diversification Opportunities for Sigma Lithium and Brunswick Exploration

0.58

Correlation Coefficient

Sigma Lithium  Brunswick Exploration

Very weak diversification

The 3 months correlation between Sigma and Brunswick is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Brunswick Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunswick Exploration and Sigma Lithium 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 Sigma Lithium Resources are associated (or correlated) with Brunswick Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunswick Exploration has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Brunswick Exploration go up and down completely randomly.

Pair Corralation between Sigma Lithium and Brunswick Exploration

Assuming the 90 days trading horizon Sigma Lithium is expected to generate 6.87 times less return on investment than Brunswick Exploration. But when comparing it to its historical volatility, Sigma Lithium Resources is 2.05 times less risky than Brunswick Exploration. It trades about 0.02 of its potential returns per unit of risk. Brunswick Exploration is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Brunswick Exploration on September 22, 2024 and sell it today you would earn a total of  2.00  from holding Brunswick Exploration or generate 14.29% return on investment over 90 days.

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

Sigma Lithium Resources  vs.  Brunswick Exploration

Sigma Lithium Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Resources are ranked lower than 1 (%) 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.

Brunswick Exploration

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brunswick Exploration are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Brunswick Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sigma Lithium and Brunswick Exploration

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

The idea behind Sigma Lithium Resources and Brunswick Exploration 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.