Correlation Between Teck Resources and Sigma Lithium

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

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

Diversification Opportunities for Teck Resources and Sigma Lithium

0.4

Correlation Coefficient

Teck Resources  Sigma Lithium

Very weak diversification

The 3 months correlation between Teck and Sigma is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Teck Resources Ltd and Sigma Lithium Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigma Lithium Resources and Teck Resources 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 Teck Resources Ltd are associated (or correlated) with Sigma Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sigma Lithium Resources has no effect on the direction of Teck Resources i.e., Teck Resources and Sigma Lithium go up and down completely randomly.

Pair Corralation between Teck Resources and Sigma Lithium

Given the investment horizon of 90 days Teck Resources is expected to generate 6.52 times less return on investment than Sigma Lithium. But when comparing it to its historical volatility, Teck Resources Ltd is 1.84 times less risky than Sigma Lithium. It trades about 0.04 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  980.00  in Sigma Lithium Resources on August 31, 2024 and sell it today you would earn a total of  409.00  from holding Sigma Lithium Resources or generate 41.73% return on investment over 90 days.

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

Teck Resources Ltd  vs.  Sigma Lithium Resources

Teck Resources

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Teck Resources Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Teck Resources is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Sigma Lithium Resources

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting primary indicators, Sigma Lithium disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teck Resources and Sigma Lithium

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

The idea behind Teck Resources Ltd and Sigma Lithium Resources 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 Global Correlations module to find global opportunities by holding instruments from different markets.