Correlation Between Uniteds and Sage Potash

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

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

Diversification Opportunities for Uniteds and Sage Potash

-0.21

Correlation Coefficient

Uniteds  Sage Potash

Very good diversification

The 3 months correlation between Uniteds and Sage is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Uniteds Limited and Sage Potash Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Potash Corp and Uniteds 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 Uniteds Limited are associated (or correlated) with Sage Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Potash Corp has no effect on the direction of Uniteds i.e., Uniteds and Sage Potash go up and down completely randomly.

Pair Corralation between Uniteds and Sage Potash

Assuming the 90 days trading horizon Uniteds is expected to generate 2.15 times less return on investment than Sage Potash. But when comparing it to its historical volatility, Uniteds Limited is 9.01 times less risky than Sage Potash. It trades about 0.14 of its potential returns per unit of risk. Sage Potash Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Sage Potash Corp on September 21, 2024 and sell it today you would earn a total of  0.00  from holding Sage Potash Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Uniteds Limited  vs.  Sage Potash Corp

Uniteds Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Uniteds Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Uniteds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 unfluctuating technical and fundamental indicators, Sage Potash showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Uniteds and Sage Potash

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

The idea behind Uniteds Limited and Sage Potash 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.