Correlation Between Sigma Lithium and Filo Mining

Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and Filo Mining 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 Filo Mining 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 Filo Mining Corp, you can compare the effects of market volatilities on Sigma Lithium and Filo Mining 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 Filo Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and Filo Mining.

Diversification Opportunities for Sigma Lithium and Filo Mining

0.69

Correlation Coefficient

Sigma Lithium  Filo Mining

Poor diversification

The 3 months correlation between Sigma and Filo is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Filo Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Filo Mining Corp 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 Filo Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Filo Mining Corp has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Filo Mining go up and down completely randomly.

Pair Corralation between Sigma Lithium and Filo Mining

Assuming the 90 days trading horizon Sigma Lithium Resources is expected to under-perform the Filo Mining. In addition to that, Sigma Lithium is 4.86 times more volatile than Filo Mining Corp. It trades about -0.23 of its total potential returns per unit of risk. Filo Mining Corp is currently generating about -0.25 per unit of volatility. If you would invest  3,252  in Filo Mining Corp on September 19, 2024 and sell it today you would lose (94.00) from holding Filo Mining Corp or give up 2.89% of portfolio value over 90 days.

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

Sigma Lithium Resources  vs.  Filo Mining Corp

Sigma Lithium Resources

Risk-Adjusted Performance

3 of 100

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.

Filo Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Filo Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Filo Mining is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sigma Lithium and Filo Mining

The main advantage of trading using opposite Sigma Lithium and Filo Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Filo Mining 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 Filo Mining will offset losses from the drop in Filo Mining's long position.

The idea behind Sigma Lithium Resources and Filo Mining Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.