Correlation Between Sigma Lithium and Trilogy Metals

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

Diversification Opportunities for Sigma Lithium and Trilogy Metals

-0.07

Correlation Coefficient

Sigma Lithium  Trilogy Metals

Good diversification

The 3 months correlation between Sigma and Trilogy is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Trilogy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trilogy Metals 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 Trilogy Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trilogy Metals has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Trilogy Metals go up and down completely randomly.

Pair Corralation between Sigma Lithium and Trilogy Metals

Given the investment horizon of 90 days Sigma Lithium Resources is expected to under-perform the Trilogy Metals. But the stock apears to be less risky and, when comparing its historical volatility, Sigma Lithium Resources is 1.63 times less risky than Trilogy Metals. The stock trades about -0.05 of its potential returns per unit of risk. The Trilogy Metals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  46.00  in Trilogy Metals on September 24, 2024 and sell it today you would earn a total of  64.00  from holding Trilogy Metals or generate 139.13% return on investment over 90 days.

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

Sigma Lithium Resources  vs.  Trilogy Metals

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. Despite latest conflicting performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Trilogy Metals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trilogy Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Trilogy Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sigma Lithium and Trilogy Metals

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

The idea behind Sigma Lithium Resources and Trilogy Metals 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.