Correlation Between Kiplin Metals and Sigma Lithium

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

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

Diversification Opportunities for Kiplin Metals and Sigma Lithium

0.3

Correlation Coefficient

Kiplin Metals  Sigma Lithium

Weak diversification

The 3 months correlation between Kiplin and Sigma is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Kiplin Metals 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 Kiplin Metals 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 Kiplin Metals 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 Kiplin Metals i.e., Kiplin Metals and Sigma Lithium go up and down completely randomly.

Pair Corralation between Kiplin Metals and Sigma Lithium

Assuming the 90 days horizon Kiplin Metals is expected to under-perform the Sigma Lithium. In addition to that, Kiplin Metals is 1.42 times more volatile than Sigma Lithium Resources. It trades about -0.13 of its total potential returns per unit of risk. Sigma Lithium Resources is currently generating about 0.0 per unit of volatility. If you would invest  1,925  in Sigma Lithium Resources on September 1, 2024 and sell it today you would lose (26.00) from holding Sigma Lithium Resources or give up 1.35% of portfolio value over 90 days.

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

Kiplin Metals  vs.  Sigma Lithium Resources

Kiplin Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kiplin Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Kiplin Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Sigma Lithium Resources

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Resources are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Sigma Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kiplin Metals and Sigma Lithium

The main advantage of trading using opposite Kiplin Metals and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kiplin Metals 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 Kiplin Metals 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.