Correlation Between Sigma Lithium and Ivanhoe Mines

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

Diversification Opportunities for Sigma Lithium and Ivanhoe Mines

0.1

Correlation Coefficient

Sigma Lithium  Ivanhoe Mines

Average diversification

The 3 months correlation between Sigma and Ivanhoe is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Ivanhoe Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivanhoe Mines 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 Ivanhoe Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivanhoe Mines has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Ivanhoe Mines go up and down completely randomly.

Pair Corralation between Sigma Lithium and Ivanhoe Mines

Assuming the 90 days trading horizon Sigma Lithium Resources is expected to under-perform the Ivanhoe Mines. In addition to that, Sigma Lithium is 1.54 times more volatile than Ivanhoe Mines. It trades about -0.02 of its total potential returns per unit of risk. Ivanhoe Mines is currently generating about 0.05 per unit of volatility. If you would invest  1,070  in Ivanhoe Mines on September 20, 2024 and sell it today you would earn a total of  617.00  from holding Ivanhoe Mines or generate 57.66% return on investment over 90 days.

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

Sigma Lithium Resources  vs.  Ivanhoe Mines

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.

Ivanhoe Mines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ivanhoe Mines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sigma Lithium and Ivanhoe Mines

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

The idea behind Sigma Lithium Resources and Ivanhoe Mines 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.