Correlation Between Sigma Lithium and Emerita Resources

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

Diversification Opportunities for Sigma Lithium and Emerita Resources

-0.75

Correlation Coefficient

Sigma Lithium  Emerita Resources

Pay attention - limited upside

The 3 months correlation between Sigma and Emerita is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Emerita Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerita Resources Corp 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 Emerita Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerita Resources Corp has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Emerita Resources go up and down completely randomly.

Pair Corralation between Sigma Lithium and Emerita Resources

Assuming the 90 days trading horizon Sigma Lithium Resources is expected to under-perform the Emerita Resources. But the stock apears to be less risky and, when comparing its historical volatility, Sigma Lithium Resources is 3.25 times less risky than Emerita Resources. The stock trades about -0.35 of its potential returns per unit of risk. The Emerita Resources Corp is currently generating about 0.41 of returns per unit of risk over similar time horizon. 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

Sigma Lithium Resources  vs.  Emerita Resources Corp

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.

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.

Pair Trading with Sigma Lithium and Emerita Resources

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

The idea behind Sigma Lithium Resources and Emerita Resources Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.