Correlation Between Intrepid Potash and China Green

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

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

Diversification Opportunities for Intrepid Potash and China Green

0.22

Correlation Coefficient

Intrepid Potash  China Green

Modest diversification

The 3 months correlation between Intrepid and China is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Intrepid Potash and China Green Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Green Agriculture and Intrepid Potash 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 Intrepid Potash are associated (or correlated) with China Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Green Agriculture has no effect on the direction of Intrepid Potash i.e., Intrepid Potash and China Green go up and down completely randomly.

Pair Corralation between Intrepid Potash and China Green

Considering the 90-day investment horizon Intrepid Potash is expected to generate 5.45 times less return on investment than China Green. But when comparing it to its historical volatility, Intrepid Potash is 3.79 times less risky than China Green. It trades about 0.04 of its potential returns per unit of risk. China Green Agriculture is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  187.00  in China Green Agriculture on September 15, 2024 and sell it today you would earn a total of  11.00  from holding China Green Agriculture or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	81.25%
Values	Daily Returns

Intrepid Potash  vs.  China Green Agriculture

Intrepid Potash

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intrepid Potash are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Intrepid Potash is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

China Green Agriculture

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days China Green Agriculture has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unfluctuating technical and fundamental indicators, China Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intrepid Potash and China Green

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

The idea behind Intrepid Potash and China Green Agriculture 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.