Correlation Between Bank First and Sigma Lithium

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

Diversification Opportunities for Bank First and Sigma Lithium

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Bank First and Sigma is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bank First National 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 Bank First 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 Bank First National 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 Bank First i.e., Bank First and Sigma Lithium go up and down completely randomly.

Pair Corralation between Bank First and Sigma Lithium

Considering the 90-day investment horizon Bank First is expected to generate 8.04 times less return on investment than Sigma Lithium. But when comparing it to its historical volatility, Bank First National is 2.81 times less risky than Sigma Lithium. It trades about 0.05 of its potential returns per unit of risk. 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 3, 2022 and sell it today you would earn a total of  3,145  from holding Sigma Lithium Resources or generate 1629.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Bank First National  vs.  Sigma Lithium Resources

 Performance (%) 
       Timeline  
Bank First National 
Bank First Performance
15 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bank First National are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Bank First sustained solid returns over the last few months and may actually be approaching a breakup point.

Bank First Price Channel

Sigma Lithium Resources 
Sigma Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting primary indicators, Sigma Lithium revealed solid returns over the last few months and may actually be approaching a breakup point.

Sigma Price Channel

Bank First and Sigma Lithium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank First and Sigma Lithium

The main advantage of trading using opposite Bank First and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank First 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.
Bank First vs. VANGUARD SMALL-CAP GROWTH
Bank First vs. GROWTH FUND OF
Bank First vs. Linde PLC
The idea behind Bank First National 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.
Sigma Lithium vs. Linde PLC
Sigma Lithium vs. GROWTH FUND OF
Sigma Lithium vs. IShares SP Mid-Cap
Sigma Lithium vs. VANGUARD SMALL-CAP GROWTH
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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