Correlation Between Boeing and Sigma Lithium

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

Diversification Opportunities for Boeing and Sigma Lithium

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between Boeing and Sigma is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing 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 Boeing 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 The Boeing 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 Boeing i.e., Boeing and Sigma Lithium go up and down completely randomly.

Pair Corralation between Boeing and Sigma Lithium

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the Sigma Lithium. But the stock apears to be less risky and, when comparing its historical volatility, The Boeing is 1.61 times less risky than Sigma Lithium. The stock trades about 0.0 of its potential returns per unit of risk. The Sigma Lithium Resources is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  193.00  in Sigma Lithium Resources on September 5, 2022 and sell it today you would earn a total of  3,214  from holding Sigma Lithium Resources or generate 1665.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

The Boeing  vs.  Sigma Lithium Resources

 Performance (%) 
       Timeline  
Boeing 
Boeing Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

Boeing Price Channel

Sigma Lithium Resources 
Sigma Performance
13 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Resources are ranked lower than 13 (%) 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

Boeing and Sigma Lithium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Boeing and Sigma Lithium

The main advantage of trading using opposite Boeing and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing 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.
Boeing vs. Elbit Systems
The idea behind The Boeing 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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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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