Correlation Between Sigma Lithium and Visa Inc

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

Diversification Opportunities for Sigma Lithium and Visa Inc

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Sigma and Visa Inc is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Visa Inc Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc Class 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 Visa Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc Class has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Visa Inc go up and down completely randomly.

Pair Corralation between Sigma Lithium and Visa Inc

Given the investment horizon of 90 days Sigma Lithium Resources is expected to generate 2.24 times more return on investment than Visa Inc. However, Sigma Lithium is 2.24 times more volatile than Visa Inc Class. It trades about 0.17 of its potential returns per unit of risk. Visa Inc Class is currently generating about 0.09 per unit of risk. If you would invest  2,291  in Sigma Lithium Resources on September 3, 2022 and sell it today you would earn a total of  1,116  from holding Sigma Lithium Resources or generate 48.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Sigma Lithium Resources  vs.  Visa Inc Class

 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

Visa Inc Class 
Visa Inc Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc Class are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Visa Inc may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Visa Inc Price Channel

Sigma Lithium and Visa Inc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sigma Lithium and Visa Inc

The main advantage of trading using opposite Sigma Lithium and Visa Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Visa Inc 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 Visa Inc will offset losses from the drop in Visa Inc's long position.
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The idea behind Sigma Lithium Resources and Visa Inc Class 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 Price Transformation module to use Price Transformation models to analyze depth of different equity instruments across global markets.

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