Correlation Between Sage Potash and Mega Uranium

Can any of the company-specific risk be diversified away by investing in both Sage Potash and Mega Uranium 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 Mega Uranium 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 Mega Uranium, you can compare the effects of market volatilities on Sage Potash and Mega Uranium 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 Mega Uranium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sage Potash and Mega Uranium.

Diversification Opportunities for Sage Potash and Mega Uranium

-0.69

Correlation Coefficient

Sage Potash  Mega Uranium

Excellent diversification

The 3 months correlation between Sage and Mega is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Mega Uranium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mega Uranium 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 Mega Uranium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mega Uranium has no effect on the direction of Sage Potash i.e., Sage Potash and Mega Uranium go up and down completely randomly.

Pair Corralation between Sage Potash and Mega Uranium

Assuming the 90 days trading horizon Sage Potash Corp is expected to under-perform the Mega Uranium. In addition to that, Sage Potash is 2.81 times more volatile than Mega Uranium. It trades about 0.0 of its total potential returns per unit of risk. Mega Uranium is currently generating about 0.22 per unit of volatility. If you would invest  32.00  in Mega Uranium on September 5, 2024 and sell it today you would earn a total of  5.00  from holding Mega Uranium or generate 15.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Sage Potash Corp  vs.  Mega Uranium

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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Mega Uranium

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mega Uranium are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Mega Uranium displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sage Potash and Mega Uranium

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

The idea behind Sage Potash Corp and Mega Uranium 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.