Correlation Between NGEx Minerals and Sigma Lithium

Can any of the company-specific risk be diversified away by investing in both NGEx 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 NGEx 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 NGEx Minerals and Sigma Lithium Resources, you can compare the effects of market volatilities on NGEx 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 NGEx Minerals with a short position of Sigma Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of NGEx Minerals and Sigma Lithium.

Diversification Opportunities for NGEx Minerals and Sigma Lithium

0.38

Correlation Coefficient

NGEx Minerals  Sigma Lithium

Weak diversification

The 3 months correlation between NGEx and Sigma is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NGEx 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 NGEx 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 NGEx 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 NGEx Minerals i.e., NGEx Minerals and Sigma Lithium go up and down completely randomly.

Pair Corralation between NGEx Minerals and Sigma Lithium

Assuming the 90 days trading horizon NGEx Minerals is expected to generate 0.79 times more return on investment than Sigma Lithium. However, NGEx Minerals is 1.27 times less risky than Sigma Lithium. It trades about 0.11 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about -0.02 per unit of risk. If you would invest  308.00  in NGEx Minerals on September 20, 2024 and sell it today you would earn a total of  1,001  from holding NGEx Minerals or generate 325.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

NGEx Minerals  vs.  Sigma Lithium Resources

NGEx Minerals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NGEx Minerals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, NGEx Minerals displayed solid returns over the last few months and may actually be approaching a breakup point.

Sigma Lithium Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable primary indicators, Sigma Lithium is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with NGEx Minerals and Sigma Lithium

The main advantage of trading using opposite NGEx Minerals and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NGEx 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 NGEx 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 Transaction History module to view history of all your transactions and understand their impact on performance.