Correlation Between FPX Nickel and Sigma Lithium

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

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

Diversification Opportunities for FPX Nickel and Sigma Lithium

-0.41

Correlation Coefficient

FPX Nickel  Sigma Lithium

Very good diversification

The 3 months correlation between FPX and Sigma is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding FPX Nickel Corp 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 FPX Nickel 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 FPX Nickel Corp 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 FPX Nickel i.e., FPX Nickel and Sigma Lithium go up and down completely randomly.

Pair Corralation between FPX Nickel and Sigma Lithium

Assuming the 90 days horizon FPX Nickel Corp is expected to generate 0.47 times more return on investment than Sigma Lithium. However, FPX Nickel Corp is 2.15 times less risky than Sigma Lithium. It trades about 0.04 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about -0.03 per unit of risk. If you would invest  25.00  in FPX Nickel Corp on April 22, 2025 and sell it today you would earn a total of  1.00  from holding FPX Nickel Corp or generate 4.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

FPX Nickel Corp  vs.  Sigma Lithium Resources

FPX Nickel Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FPX Nickel Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, FPX Nickel is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sigma Lithium Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sigma Lithium Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's primary indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with FPX Nickel and Sigma Lithium

The main advantage of trading using opposite FPX Nickel and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FPX Nickel 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 FPX Nickel Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.