Correlation Between Sigma Lithium and Amgen

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

Diversification Opportunities for Sigma Lithium and Amgen

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Sigma and Amgen is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen 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 Resources are associated (or correlated) with Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Amgen go up and down completely randomly.

Pair Corralation between Sigma Lithium and Amgen

Given the investment horizon of 90 days Sigma Lithium is expected to generate 1.6 times less return on investment than Amgen. In addition to that, Sigma Lithium is 2.66 times more volatile than Amgen Inc. It trades about 0.05 of its total potential returns per unit of risk. Amgen Inc is currently generating about 0.2 per unit of volatility. If you would invest  26,717  in Amgen Inc on September 3, 2022 and sell it today you would earn a total of  1,828  from holding Amgen Inc or generate 6.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Sigma Lithium Resources  vs.  Amgen Inc

 Performance (%) 
       Timeline  
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 conflicting primary indicators, Sigma Lithium revealed solid returns over the last few months and may actually be approaching a breakup point.

Sigma Price Channel

Amgen Inc 
Amgen Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Amgen disclosed solid returns over the last few months and may actually be approaching a breakup point.

Amgen Price Channel

Sigma Lithium and Amgen Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sigma Lithium and Amgen

The main advantage of trading using opposite Sigma Lithium and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Amgen 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 Amgen will offset losses from the drop in Amgen's long position.
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The idea behind Sigma Lithium Resources and Amgen 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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