Correlation Between Sigma Lithium and Solitario Exploration

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

Diversification Opportunities for Sigma Lithium and Solitario Exploration

-0.03

Correlation Coefficient

Sigma Lithium  Solitario Exploration

Good diversification

The 3 months correlation between Sigma and Solitario is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Solitario Exploration Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solitario 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 Solitario Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solitario Exploration has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Solitario Exploration go up and down completely randomly.

Pair Corralation between Sigma Lithium and Solitario Exploration

Given the investment horizon of 90 days Sigma Lithium Resources is expected to under-perform the Solitario Exploration. In addition to that, Sigma Lithium is 1.18 times more volatile than Solitario Exploration Royalty. It trades about -0.02 of its total potential returns per unit of risk. Solitario Exploration Royalty is currently generating about 0.01 per unit of volatility. If you would invest  64.00  in Solitario Exploration Royalty on September 24, 2024 and sell it today you would lose (3.00) from holding Solitario Exploration Royalty or give up 4.69% of portfolio value over 90 days.

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

Sigma Lithium Resources  vs.  Solitario Exploration Royalty

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.

Solitario Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solitario Exploration Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Sigma Lithium and Solitario Exploration

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

The idea behind Sigma Lithium Resources and Solitario Exploration Royalty 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.