Correlation Between Sigma Lithium and Hercules Silver

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Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and Hercules Silver 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 Hercules Silver into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sigma Lithium Corp and Hercules Silver Corp, you can compare the effects of market volatilities on Sigma Lithium and Hercules Silver 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 Hercules Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and Hercules Silver.

Diversification Opportunities for Sigma Lithium and Hercules Silver

-0.13
  Correlation Coefficient

Good diversification

The 24 months correlation between Sigma and Hercules is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Corp and Hercules Silver Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Silver 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 Corp are associated (or correlated) with Hercules Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hercules Silver Corp has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Hercules Silver go up and down completely randomly.

Pair Corralation between Sigma Lithium and Hercules Silver

Given the investment horizon of 90 days Sigma Lithium Corp is expected to generate 0.39 times more return on investment than Hercules Silver. However, Sigma Lithium Corp is 2.54 times less risky than Hercules Silver. It trades about 0.15 of its potential returns per unit of risk. Hercules Silver Corp is currently generating about 0.03 per unit of risk. If you would invest  205.00  in Sigma Lithium Corp on September 1, 2022 and sell it today you would earn a total of  2,967  from holding Sigma Lithium Corp or generate 1447.32% return on investment over 90 days.
Time Period24 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy26.36%
ValuesDaily Returns

Sigma Lithium Corp  vs.  Hercules Silver Corp

 Performance (%) 
       Timeline  
Sigma Lithium Corp 
Sigma Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Sigma Lithium revealed solid returns over the last few months and may actually be approaching a breakup point.

Sigma Price Channel

Hercules Silver Corp 
Hercules Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Silver Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Hercules Silver exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hercules Price Channel

Sigma Lithium and Hercules Silver Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sigma Lithium and Hercules Silver

The main advantage of trading using opposite Sigma Lithium and Hercules Silver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Hercules Silver 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 Hercules Silver will offset losses from the drop in Hercules Silver's long position.
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The idea behind Sigma Lithium Corp and Hercules Silver 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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Check out your portfolio center. 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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