Correlation Between Shore Bancshares and Sigma Lithium

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

Diversification Opportunities for Shore Bancshares and Sigma Lithium

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Shore and Sigma is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Shore Bancshares 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 Shore Bancshares 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 Shore Bancshares 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 Shore Bancshares i.e., Shore Bancshares and Sigma Lithium go up and down completely randomly.

Pair Corralation between Shore Bancshares and Sigma Lithium

Given the investment horizon of 90 days Shore Bancshares is expected to generate 1.4 times less return on investment than Sigma Lithium. But when comparing it to its historical volatility, Shore Bancshares is 3.87 times less risky than Sigma Lithium. It trades about 0.07 of its potential returns per unit of risk. Sigma Lithium Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,325  in Sigma Lithium Resources on September 3, 2022 and sell it today you would earn a total of  13.00  from holding Sigma Lithium Resources or generate 0.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Shore Bancshares  vs.  Sigma Lithium Resources

 Performance (%) 
       Timeline  
Shore Bancshares 
Shore Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Shore Bancshares are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental drivers, Shore Bancshares may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Shore 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

Shore Bancshares and Sigma Lithium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shore Bancshares and Sigma Lithium

The main advantage of trading using opposite Shore Bancshares and Sigma Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shore Bancshares 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.
Shore Bancshares vs. Linde PLC
Shore Bancshares vs. GROWTH FUND OF
Shore Bancshares vs. VANGUARD SMALL-CAP GROWTH
The idea behind Shore Bancshares 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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