Correlation Between Monarca Minerals and Sigma Lithium

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

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

Diversification Opportunities for Monarca Minerals and Sigma Lithium

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Correlation Coefficient

Monarca Minerals  Sigma Lithium

Pay attention - limited upside

The 3 months correlation between Monarca and Sigma is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Monarca Minerals 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 Monarca Minerals 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 Monarca Minerals 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 Monarca Minerals i.e., Monarca Minerals and Sigma Lithium go up and down completely randomly.

Pair Corralation between Monarca Minerals and Sigma Lithium

Assuming the 90 days horizon Monarca Minerals is expected to under-perform the Sigma Lithium. In addition to that, Monarca Minerals is 4.91 times more volatile than Sigma Lithium Resources. It trades about -0.21 of its total potential returns per unit of risk. Sigma Lithium Resources is currently generating about -0.46 per unit of volatility. If you would invest  1,990  in Sigma Lithium Resources on September 24, 2024 and sell it today you would lose (386.00) from holding Sigma Lithium Resources or give up 19.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Monarca Minerals  vs.  Sigma Lithium Resources

Monarca Minerals

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Monarca Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Monarca Minerals is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sigma Lithium Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sigma Lithium Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Sigma Lithium is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Monarca Minerals and Sigma Lithium

The main advantage of trading using opposite Monarca Minerals and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monarca Minerals 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 Monarca Minerals 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 Commodity Directory module to find actively traded commodities issued by global exchanges.