Correlation Between Patriot Battery and Sigma Lithium

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

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

Diversification Opportunities for Patriot Battery and Sigma Lithium

0.09

Correlation Coefficient

Patriot Battery  Sigma Lithium

Significant diversification

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

Pair Corralation between Patriot Battery and Sigma Lithium

Assuming the 90 days horizon Patriot Battery Metals is expected to generate 2.36 times more return on investment than Sigma Lithium. However, Patriot Battery is 2.36 times more volatile than Sigma Lithium Resources. It trades about 0.19 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about 0.01 per unit of risk. If you would invest  194.00  in Patriot Battery Metals on October 6, 2024 and sell it today you would earn a total of  49.00  from holding Patriot Battery Metals or generate 25.26% return on investment over 90 days.

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

Patriot Battery Metals  vs.  Sigma Lithium Resources

Patriot Battery Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Patriot Battery Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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. Despite latest conflicting performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Patriot Battery and Sigma Lithium

The main advantage of trading using opposite Patriot Battery and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Patriot Battery 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 Patriot Battery 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.