Correlation Between Lode Gold and Sigma Lithium

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

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

Diversification Opportunities for Lode Gold and Sigma Lithium

-0.09

Correlation Coefficient

Lode Gold  Sigma Lithium

Good diversification

The 3 months correlation between Lode and Sigma is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lode Gold Resources 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 Lode Gold 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 Lode Gold Resources 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 Lode Gold i.e., Lode Gold and Sigma Lithium go up and down completely randomly.

Pair Corralation between Lode Gold and Sigma Lithium

Assuming the 90 days horizon Lode Gold Resources is expected to generate 2.31 times more return on investment than Sigma Lithium. However, Lode Gold is 2.31 times more volatile than Sigma Lithium Resources. It trades about 0.12 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about 0.07 per unit of risk. If you would invest  16.00  in Lode Gold Resources on December 19, 2024 and sell it today you would earn a total of  7.00  from holding Lode Gold Resources or generate 43.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Lode Gold Resources  vs.  Sigma Lithium Resources

Lode Gold Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lode Gold Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lode Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Sigma Lithium Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Resources are ranked lower than 5 (%) 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 Lode Gold and Sigma Lithium

The main advantage of trading using opposite Lode Gold and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lode Gold 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 Lode Gold Resources 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.