Correlation Between Sage Potash and Peyto ExplorationDevel

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

Diversification Opportunities for Sage Potash and Peyto ExplorationDevel

-0.57

Correlation Coefficient

Sage Potash  Peyto ExplorationDevel

Excellent diversification

The 3 months correlation between Sage and Peyto is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Peyto ExplorationDevelopment C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peyto ExplorationDevel 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 Peyto ExplorationDevel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peyto ExplorationDevel has no effect on the direction of Sage Potash i.e., Sage Potash and Peyto ExplorationDevel go up and down completely randomly.

Pair Corralation between Sage Potash and Peyto ExplorationDevel

Assuming the 90 days trading horizon Sage Potash is expected to generate 1.17 times less return on investment than Peyto ExplorationDevel. In addition to that, Sage Potash is 4.48 times more volatile than Peyto ExplorationDevelopment Corp. It trades about 0.03 of its total potential returns per unit of risk. Peyto ExplorationDevelopment Corp is currently generating about 0.17 per unit of volatility. If you would invest  1,394  in Peyto ExplorationDevelopment Corp on September 12, 2024 and sell it today you would earn a total of  237.00  from holding Peyto ExplorationDevelopment Corp or generate 17.0% 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.  Peyto ExplorationDevelopment C

Sage Potash Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sage Potash Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Sage Potash showed solid returns over the last few months and may actually be approaching a breakup point.

Peyto ExplorationDevel

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Sage Potash and Peyto ExplorationDevel

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

The idea behind Sage Potash Corp and Peyto ExplorationDevelopment Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.