Correlation Between Sage Potash and Imperial Oil
Can any of the company-specific risk be diversified away by investing in both Sage Potash and Imperial Oil 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 Imperial Oil 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 Imperial Oil, you can compare the effects of market volatilities on Sage Potash and Imperial Oil 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 Imperial Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sage Potash and Imperial Oil.
Diversification Opportunities for Sage Potash and Imperial Oil
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sage and Imperial is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Imperial Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil 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 Imperial Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Oil has no effect on the direction of Sage Potash i.e., Sage Potash and Imperial Oil go up and down completely randomly.
Pair Corralation between Sage Potash and Imperial Oil
Assuming the 90 days trading horizon Sage Potash is expected to generate 2.27 times less return on investment than Imperial Oil. In addition to that, Sage Potash is 3.87 times more volatile than Imperial Oil. It trades about 0.01 of its total potential returns per unit of risk. Imperial Oil is currently generating about 0.1 per unit of volatility. If you would invest 9,184 in Imperial Oil on September 7, 2024 and sell it today you would earn a total of 1,031 from holding Imperial Oil or generate 11.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Sage Potash Corp vs. Imperial Oil
Performance |
Timeline |
Sage Potash Corp |
Imperial Oil |
Sage Potash and Imperial Oil Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sage Potash and Imperial Oil
The main advantage of trading using opposite Sage Potash and Imperial Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sage Potash position performs unexpectedly, Imperial Oil 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 Imperial Oil will offset losses from the drop in Imperial Oil's long position.Sage Potash vs. Pembina Pipeline Corp | Sage Potash vs. Keyera Corp | Sage Potash vs. Emera Inc | Sage Potash vs. TC Energy Corp |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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