Correlation Between General Dynamics and Sigma Lithium

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

Diversification Opportunities for General Dynamics and Sigma Lithium

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between General and Sigma is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics Corp and Sigma Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigma Lithium Corp and General Dynamics 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 General Dynamics Corp 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 Corp has no effect on the direction of General Dynamics i.e., General Dynamics and Sigma Lithium go up and down completely randomly.

Pair Corralation between General Dynamics and Sigma Lithium

Allowing for the 90-day total investment horizon General Dynamics is expected to generate 5.37 times less return on investment than Sigma Lithium. But when comparing it to its historical volatility, General Dynamics Corp is 3.2 times less risky than Sigma Lithium. It trades about 0.09 of its potential returns per unit of risk. Sigma Lithium Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  219.00  in Sigma Lithium Corp on August 31, 2022 and sell it today you would earn a total of  2,953  from holding Sigma Lithium Corp or generate 1348.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

General Dynamics Corp  vs.  Sigma Lithium Corp

 Performance (%) 
       Timeline  
General Dynamics Corp 
General Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Dynamics Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, General Dynamics may actually be approaching a critical reversion point that can send shares even higher in December 2022.

General Price Channel

Sigma Lithium Corp 
Sigma Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Corp are ranked lower than 10 (%) 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

General Dynamics and Sigma Lithium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Dynamics and Sigma Lithium

The main advantage of trading using opposite General Dynamics and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Dynamics 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.
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The idea behind General Dynamics Corp and Sigma Lithium 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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