Correlation Between Sigma Lithium and FNB Corp

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

Diversification Opportunities for Sigma Lithium and FNB Corp

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Sigma and FNB Corp is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and FNB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB Corp 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 FNB Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB Corp has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and FNB Corp go up and down completely randomly.

Pair Corralation between Sigma Lithium and FNB Corp

Given the investment horizon of 90 days Sigma Lithium Resources is expected to generate 2.86 times more return on investment than FNB Corp. However, Sigma Lithium is 2.86 times more volatile than FNB Corp. It trades about -0.01 of its potential returns per unit of risk. FNB Corp is currently generating about -0.06 per unit of risk. If you would invest  3,539  in Sigma Lithium Resources on September 2, 2022 and sell it today you would lose (109.00)  from holding Sigma Lithium Resources or give up 3.08% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Sigma Lithium Resources  vs.  FNB Corp

 Performance (%) 
       Timeline  
Sigma Lithium Resources 
Sigma Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Sigma Lithium Resources are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain primary indicators, Sigma Lithium revealed solid returns over the last few months and may actually be approaching a breakup point.

Sigma Price Channel

FNB Corp 
FNB Corp Performance
13 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in FNB Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, FNB Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

FNB Corp Price Channel

Sigma Lithium and FNB Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sigma Lithium and FNB Corp

The main advantage of trading using opposite Sigma Lithium and FNB Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, FNB Corp 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 FNB Corp will offset losses from the drop in FNB Corp's long position.
Sigma Lithium vs. Microsoft
The idea behind Sigma Lithium Resources and FNB 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.
FNB Corp vs. Procter Gamble
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 Global Correlations module to find global opportunities by holding instruments from different markets.

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