Correlation Between Sage Potash and Pembina Pipeline
Can any of the company-specific risk be diversified away by investing in both Sage Potash and Pembina Pipeline 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 Pembina Pipeline 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 Pembina Pipeline Corp, you can compare the effects of market volatilities on Sage Potash and Pembina Pipeline 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 Pembina Pipeline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sage Potash and Pembina Pipeline.
Diversification Opportunities for Sage Potash and Pembina Pipeline
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sage and Pembina is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of Sage Potash i.e., Sage Potash and Pembina Pipeline go up and down completely randomly.
Pair Corralation between Sage Potash and Pembina Pipeline
Assuming the 90 days trading horizon Sage Potash Corp is expected to generate 8.76 times more return on investment than Pembina Pipeline. However, Sage Potash is 8.76 times more volatile than Pembina Pipeline Corp. It trades about 0.03 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.08 per unit of risk. If you would invest 25.00 in Sage Potash Corp on August 29, 2024 and sell it today you would lose (7.00) from holding Sage Potash Corp or give up 28.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sage Potash Corp vs. Pembina Pipeline Corp
Performance |
| Timeline |
| Sage Potash Corp |
| Pembina Pipeline Corp |
Sage Potash and Pembina Pipeline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sage Potash and Pembina Pipeline
The main advantage of trading using opposite Sage Potash and Pembina Pipeline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sage Potash position performs unexpectedly, Pembina Pipeline 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 Pembina Pipeline will offset losses from the drop in Pembina Pipeline's long position.| Sage Potash vs. Canadian Natural Resources | Sage Potash vs. Suncor Energy | Sage Potash vs. iShares Canadian HYBrid | Sage Potash vs. Altagas Cum Red |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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