Correlation Between Sigma Lithium and Foraco International

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Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and Foraco International 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 Sigma Lithium and Foraco International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sigma Lithium Resources and Foraco International SA, you can compare the effects of market volatilities on Sigma Lithium and Foraco International 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 Sigma Lithium with a short position of Foraco International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and Foraco International.

Diversification Opportunities for Sigma Lithium and Foraco International

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Sigma and Foraco is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Foraco International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foraco International and Sigma Lithium 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 Sigma Lithium Resources are associated (or correlated) with Foraco International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foraco International has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Foraco International go up and down completely randomly.

Pair Corralation between Sigma Lithium and Foraco International

Assuming the 90 days trading horizon Sigma Lithium Resources is expected to under-perform the Foraco International. But the stock apears to be less risky and, when comparing its historical volatility, Sigma Lithium Resources is 1.08 times less risky than Foraco International. The stock trades about -0.29 of its potential returns per unit of risk. The Foraco International SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  217.00  in Foraco International SA on September 19, 2024 and sell it today you would earn a total of  8.00  from holding Foraco International SA or generate 3.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

Sigma Lithium Resources  vs.  Foraco International SA

 Performance 
       Timeline  
Sigma Lithium Resources 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Sigma Lithium may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Foraco International 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Foraco International SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Foraco International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sigma Lithium and Foraco International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sigma Lithium and Foraco International

The main advantage of trading using opposite Sigma Lithium and Foraco International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Foraco International 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 Foraco International will offset losses from the drop in Foraco International's long position.
The idea behind Sigma Lithium Resources and Foraco International SA 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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