Correlation Between Sigma Lithium and Standard Lithium

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

Diversification Opportunities for Sigma Lithium and Standard Lithium

-0.32

Correlation Coefficient

Sigma Lithium  Standard Lithium

Very good diversification

The 3 months correlation between Sigma and Standard is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Standard Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Lithium 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 Standard Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Lithium has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Standard Lithium go up and down completely randomly.

Pair Corralation between Sigma Lithium and Standard Lithium

Assuming the 90 days trading horizon Sigma Lithium Resources is expected to under-perform the Standard Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Sigma Lithium Resources is 1.02 times less risky than Standard Lithium. The stock trades about -0.03 of its potential returns per unit of risk. The Standard Lithium is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  225.00  in Standard Lithium on April 24, 2025 and sell it today you would earn a total of  137.00  from holding Standard Lithium or generate 60.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Sigma Lithium Resources  vs.  Standard Lithium

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.

Standard Lithium

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Lithium are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Standard Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sigma Lithium and Standard Lithium

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

The idea behind Sigma Lithium Resources and Standard Lithium 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.