Correlation Between Sigma Lithium and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Sigma Lithium and Johnson Johnson 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 Johnson Johnson 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 Johnson Johnson, you can compare the effects of market volatilities on Sigma Lithium and Johnson Johnson 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 Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sigma Lithium and Johnson Johnson.
Diversification Opportunities for Sigma Lithium and Johnson Johnson
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sigma and Johnson is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson 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 Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Johnson Johnson go up and down completely randomly.
Pair Corralation between Sigma Lithium and Johnson Johnson
Given the investment horizon of 90 days Sigma Lithium Resources is expected to generate 4.24 times more return on investment than Johnson Johnson. However, Sigma Lithium is 4.24 times more volatile than Johnson Johnson. It trades about 0.21 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.2 per unit of risk. If you would invest 1,185 in Sigma Lithium Resources on January 25, 2024 and sell it today you would earn a total of 222.00 from holding Sigma Lithium Resources or generate 18.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Sigma Lithium Resources vs. Johnson Johnson
Performance |
Timeline |
Sigma Lithium Resources |
Johnson Johnson |
Sigma Lithium and Johnson Johnson Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sigma Lithium and Johnson Johnson
The main advantage of trading using opposite Sigma Lithium and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Johnson Johnson 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 Johnson Johnson will offset losses from the drop in Johnson Johnson's long position.Sigma Lithium vs. Skeena Resources | Sigma Lithium vs. Materion | Sigma Lithium vs. Fury Gold Mines | Sigma Lithium vs. Eskay Mining Corp |
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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 the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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