Correlation Between Sigma Lithium and Western Copper

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

Diversification Opportunities for Sigma Lithium and Western Copper

0.16

Correlation Coefficient

Sigma Lithium  Western Copper

Average diversification

The 3 months correlation between Sigma and Western is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Western Copper go up and down completely randomly.

Pair Corralation between Sigma Lithium and Western Copper

Given the investment horizon of 90 days Sigma Lithium Resources is expected to under-perform the Western Copper. In addition to that, Sigma Lithium is 1.32 times more volatile than Western Copper and. It trades about -0.02 of its total potential returns per unit of risk. Western Copper and is currently generating about -0.02 per unit of volatility. If you would invest  179.00  in Western Copper and on September 24, 2024 and sell it today you would lose (75.00) from holding Western Copper and or give up 41.9% of portfolio value over 90 days.

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

Sigma Lithium Resources  vs.  Western Copper and

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.

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Sigma Lithium and Western Copper

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

The idea behind Sigma Lithium Resources and Western Copper and 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.