Correlation Between Teck Resources and Sigma Lithium

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

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

Diversification Opportunities for Teck Resources and Sigma Lithium

0.12

Correlation Coefficient

Teck Resources  Sigma Lithium

Average diversification

The 3 months correlation between Teck and Sigma is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Teck Resources Limited 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 Teck Resources 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 Teck Resources Limited 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 Teck Resources i.e., Teck Resources and Sigma Lithium go up and down completely randomly.

Pair Corralation between Teck Resources and Sigma Lithium

Assuming the 90 days trading horizon Teck Resources Limited is expected to generate 0.59 times more return on investment than Sigma Lithium. However, Teck Resources Limited is 1.69 times less risky than Sigma Lithium. It trades about 0.02 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  5,032  in Teck Resources Limited on September 20, 2024 and sell it today you would earn a total of  758.00  from holding Teck Resources Limited or generate 15.06% return on investment over 90 days.

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

Teck Resources Limited  vs.  Sigma Lithium Resources

Teck Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teck Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 Teck Resources and Sigma Lithium

The main advantage of trading using opposite Teck Resources and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teck Resources 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 Teck Resources Limited 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.