Correlation Between Sage Potash and Eni SPA
Can any of the company-specific risk be diversified away by investing in both Sage Potash and Eni SPA 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 Eni SPA 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 Enterprise Group, you can compare the effects of market volatilities on Sage Potash and Eni SPA 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 Eni SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sage Potash and Eni SPA.
Diversification Opportunities for Sage Potash and Eni SPA
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sage and Eni is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Enterprise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Group 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 Eni SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Group has no effect on the direction of Sage Potash i.e., Sage Potash and Eni SPA go up and down completely randomly.
Pair Corralation between Sage Potash and Eni SPA
Assuming the 90 days trading horizon Sage Potash Corp is expected to under-perform the Eni SPA. But the stock apears to be less risky and, when comparing its historical volatility, Sage Potash Corp is 1.17 times less risky than Eni SPA. The stock trades about -0.04 of its potential returns per unit of risk. The Enterprise Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 135.00 in Enterprise Group on September 13, 2024 and sell it today you would earn a total of 54.00 from holding Enterprise Group or generate 40.0% 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. Enterprise Group
Performance |
| Timeline |
| Sage Potash Corp |
| Enterprise Group |
Sage Potash and Eni SPA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sage Potash and Eni SPA
The main advantage of trading using opposite Sage Potash and Eni SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sage Potash position performs unexpectedly, Eni SPA 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 Eni SPA will offset losses from the drop in Eni SPA's long position.| Sage Potash vs. Millennium Silver Corp | Sage Potash vs. 2028 Investment Grade | Sage Potash vs. Queens Road Capital | Sage Potash vs. Bip Investment Corp |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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