Correlation Between Sage Potash and MEG Energy
Can any of the company-specific risk be diversified away by investing in both Sage Potash and MEG Energy 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 MEG Energy 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 MEG Energy Corp, you can compare the effects of market volatilities on Sage Potash and MEG Energy 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 MEG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sage Potash and MEG Energy.
Diversification Opportunities for Sage Potash and MEG Energy
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sage and MEG is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and MEG Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEG Energy Corp 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 MEG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEG Energy Corp has no effect on the direction of Sage Potash i.e., Sage Potash and MEG Energy go up and down completely randomly.
Pair Corralation between Sage Potash and MEG Energy
Assuming the 90 days trading horizon Sage Potash Corp is expected to under-perform the MEG Energy. In addition to that, Sage Potash is 2.42 times more volatile than MEG Energy Corp. It trades about -0.1 of its total potential returns per unit of risk. MEG Energy Corp is currently generating about -0.04 per unit of volatility. If you would invest 2,360 in MEG Energy Corp on November 18, 2024 and sell it today you would lose (62.00) from holding MEG Energy Corp or give up 2.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sage Potash Corp vs. MEG Energy Corp
Performance |
| Timeline |
| Sage Potash Corp |
| MEG Energy Corp |
Sage Potash and MEG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sage Potash and MEG Energy
The main advantage of trading using opposite Sage Potash and MEG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sage Potash position performs unexpectedly, MEG Energy 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 MEG Energy will offset losses from the drop in MEG Energy's long position.| Sage Potash vs. Arizona Metals Corp | Sage Potash vs. NeXGold Mining Corp | Sage Potash vs. Empire Metals Corp | Sage Potash vs. Nicola Mining |
| MEG Energy vs. Baytex Energy Corp | MEG Energy vs. Whitecap Resources | MEG Energy vs. Tamarack Valley Energy | MEG Energy vs. ARC Resources |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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