Correlation Between Sigma Lithium and Visa

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

Diversification Opportunities for Sigma Lithium and Visa

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Sigma and Visa is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Corp and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Visa go up and down completely randomly.

Pair Corralation between Sigma Lithium and Visa

Given the investment horizon of 90 days Sigma Lithium Corp is expected to generate 2.42 times more return on investment than Visa. However, Sigma Lithium is 2.42 times more volatile than Visa Inc. It trades about 0.15 of its potential returns per unit of risk. Visa Inc is currently generating about 0.01 per unit of risk. If you would invest  219.00  in Sigma Lithium Corp on August 31, 2022 and sell it today you would earn a total of  2,814  from holding Sigma Lithium Corp or generate 1284.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Sigma Lithium Corp  vs.  Visa Inc

 Performance (%) 
       Timeline  
Sigma Lithium Corp 
Sigma Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Corp are ranked lower than 9 (%) 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

Visa Inc 
Visa Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Visa Price Channel

Sigma Lithium and Visa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sigma Lithium and Visa

The main advantage of trading using opposite Sigma Lithium and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.
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The idea behind Sigma Lithium Corp and Visa Inc 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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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