Correlation Between Intrepid Potash and Mosaic

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

By analyzing existing cross correlation between Intrepid Potash and The Mosaic, you can compare the effects of market volatilities on Intrepid Potash and Mosaic 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 Mosaic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intrepid Potash and Mosaic.

Diversification Opportunities for Intrepid Potash and Mosaic

0.35

Correlation Coefficient

Intrepid Potash  Mosaic

Weak diversification

The 3 months correlation between Intrepid and Mosaic is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Intrepid Potash and The Mosaic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mosaic 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 Mosaic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mosaic has no effect on the direction of Intrepid Potash i.e., Intrepid Potash and Mosaic go up and down completely randomly.

Pair Corralation between Intrepid Potash and Mosaic

Considering the 90-day investment horizon Intrepid Potash is expected to generate 1.17 times more return on investment than Mosaic. However, Intrepid Potash is 1.17 times more volatile than The Mosaic. It trades about 0.14 of its potential returns per unit of risk. The Mosaic is currently generating about -0.03 per unit of risk. If you would invest  2,502  in Intrepid Potash on August 31, 2024 and sell it today you would earn a total of  209.00  from holding Intrepid Potash or generate 8.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Intrepid Potash  vs.  The Mosaic

Intrepid Potash

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intrepid Potash are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Intrepid Potash demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Mosaic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Mosaic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mosaic is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Intrepid Potash and Mosaic

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

The idea behind Intrepid Potash and The Mosaic 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 Transaction History module to view history of all your transactions and understand their impact on performance.