Correlation Between Critical Solutions and Potash America

Can any of the company-specific risk be diversified away by investing in both Critical Solutions and Potash America 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 Critical Solutions and Potash America into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Critical Solutions and Potash America, you can compare the effects of market volatilities on Critical Solutions and Potash America 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 Critical Solutions with a short position of Potash America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Critical Solutions and Potash America.

Diversification Opportunities for Critical Solutions and Potash America

-0.02

Correlation Coefficient

Critical Solutions  Potash America

Good diversification

The 3 months correlation between Critical and Potash is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Critical Solutions and Potash America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potash America and Critical Solutions 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 Critical Solutions are associated (or correlated) with Potash America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potash America has no effect on the direction of Critical Solutions i.e., Critical Solutions and Potash America go up and down completely randomly.

Pair Corralation between Critical Solutions and Potash America

If you would invest  0.07  in Potash America on September 2, 2024 and sell it today you would earn a total of  0.02  from holding Potash America or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Critical Solutions  vs.  Potash America

Critical Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Critical Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Critical Solutions is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Potash America

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Potash America are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Potash America displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Critical Solutions and Potash America

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

The idea behind Critical Solutions and Potash America 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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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.