Correlation Between Sage Potash and Canadian Imperial

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

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

Diversification Opportunities for Sage Potash and Canadian Imperial

-0.49

Correlation Coefficient

Sage Potash  Canadian Imperial

Very good diversification

The 3 months correlation between Sage and Canadian is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Canadian Imperial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Imperial Bank and Sage 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 Sage Potash Corp are associated (or correlated) with Canadian Imperial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Imperial Bank has no effect on the direction of Sage Potash i.e., Sage Potash and Canadian Imperial go up and down completely randomly.

Pair Corralation between Sage Potash and Canadian Imperial

Assuming the 90 days trading horizon Sage Potash Corp is expected to generate 18.76 times more return on investment than Canadian Imperial. However, Sage Potash is 18.76 times more volatile than Canadian Imperial Bank. It trades about 0.03 of its potential returns per unit of risk. Canadian Imperial Bank is currently generating about 0.2 per unit of risk. If you would invest  23.00  in Sage Potash Corp on September 17, 2024 and sell it today you would lose (3.00) from holding Sage Potash Corp or give up 13.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Sage Potash Corp  vs.  Canadian Imperial Bank

Sage Potash Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sage Potash Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Sage Potash is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Canadian Imperial Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Imperial Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Canadian Imperial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sage Potash and Canadian Imperial

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

The idea behind Sage Potash Corp and Canadian Imperial Bank 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.