Correlation Between Filo Mining and Sigma Lithium

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

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

Diversification Opportunities for Filo Mining and Sigma Lithium

0.69

Correlation Coefficient

Filo Mining  Sigma Lithium

Poor diversification

The 3 months correlation between Filo and Sigma is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Filo Mining Corp 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 Filo Mining 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 Filo Mining Corp 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 Filo Mining i.e., Filo Mining and Sigma Lithium go up and down completely randomly.

Pair Corralation between Filo Mining and Sigma Lithium

Assuming the 90 days trading horizon Filo Mining Corp is expected to generate 0.21 times more return on investment than Sigma Lithium. However, Filo Mining Corp is 4.86 times less risky than Sigma Lithium. It trades about -0.25 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about -0.23 per unit of risk. If you would invest  3,252  in Filo Mining Corp on September 19, 2024 and sell it today you would lose (94.00) from holding Filo Mining Corp or give up 2.89% of portfolio value over 90 days.

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

Filo Mining Corp  vs.  Sigma Lithium Resources

Filo Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Filo Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Filo Mining is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sigma Lithium Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Sigma Lithium may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Filo Mining and Sigma Lithium

The main advantage of trading using opposite Filo Mining and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Filo Mining 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 Filo Mining Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.