Correlation Between Sigma Lithium and Nephros

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

Diversification Opportunities for Sigma Lithium and Nephros

0.45

Correlation Coefficient

Sigma Lithium  Nephros

Very weak diversification

The 3 months correlation between Sigma and Nephros is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sigma Lithium Resources and Nephros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nephros 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 Nephros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nephros has no effect on the direction of Sigma Lithium i.e., Sigma Lithium and Nephros go up and down completely randomly.

Pair Corralation between Sigma Lithium and Nephros

Given the investment horizon of 90 days Sigma Lithium Resources is expected to generate 1.83 times more return on investment than Nephros. However, Sigma Lithium is 1.83 times more volatile than Nephros. It trades about 0.25 of its potential returns per unit of risk. Nephros is currently generating about -0.01 per unit of risk. If you would invest  1,152  in Sigma Lithium Resources on January 26, 2024 and sell it today you would earn a total of  255.00  from holding Sigma Lithium Resources or generate 22.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Sigma Lithium Resources  vs.  Nephros

Sigma Lithium Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sigma Lithium Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Nephros

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nephros has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Sigma Lithium and Nephros

The main advantage of trading using opposite Sigma Lithium and Nephros positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sigma Lithium position performs unexpectedly, Nephros 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 Nephros will offset losses from the drop in Nephros' long position.

The idea behind Sigma Lithium Resources and Nephros 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.