Correlation Between Ameriwest Lithium and Sigma Lithium

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

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

Diversification Opportunities for Ameriwest Lithium and Sigma Lithium

-0.44

Correlation Coefficient

Ameriwest Lithium  Sigma Lithium

Very good diversification

The 3 months correlation between Ameriwest and Sigma is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ameriwest Lithium 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 Ameriwest 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 Ameriwest Lithium 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 Ameriwest Lithium i.e., Ameriwest Lithium and Sigma Lithium go up and down completely randomly.

Pair Corralation between Ameriwest Lithium and Sigma Lithium

Assuming the 90 days horizon Ameriwest Lithium is expected to under-perform the Sigma Lithium. In addition to that, Ameriwest Lithium is 1.65 times more volatile than Sigma Lithium Resources. It trades about -0.03 of its total potential returns per unit of risk. Sigma Lithium Resources is currently generating about 0.15 per unit of volatility. If you would invest  980.00  in Sigma Lithium Resources on September 2, 2024 and sell it today you would earn a total of  396.00  from holding Sigma Lithium Resources or generate 40.41% return on investment over 90 days.

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

Ameriwest Lithium  vs.  Sigma Lithium Resources

Ameriwest Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ameriwest Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sigma Lithium Resources

Risk-Adjusted Performance

12 of 100

Good

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 Ameriwest Lithium and Sigma Lithium

The main advantage of trading using opposite Ameriwest Lithium and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriwest Lithium 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 Ameriwest Lithium 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.