Correlation Between Sage Potash and Parex Resources
Can any of the company-specific risk be diversified away by investing in both Sage Potash and Parex Resources 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 Parex Resources 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 Parex Resources, you can compare the effects of market volatilities on Sage Potash and Parex Resources 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 Parex Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sage Potash and Parex Resources.
Diversification Opportunities for Sage Potash and Parex Resources
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sage and Parex is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Parex Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parex Resources 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 Parex Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parex Resources has no effect on the direction of Sage Potash i.e., Sage Potash and Parex Resources go up and down completely randomly.
Pair Corralation between Sage Potash and Parex Resources
Assuming the 90 days trading horizon Sage Potash is expected to generate 1.1 times less return on investment than Parex Resources. In addition to that, Sage Potash is 3.25 times more volatile than Parex Resources. It trades about 0.03 of its total potential returns per unit of risk. Parex Resources is currently generating about 0.12 per unit of volatility. If you would invest 1,279 in Parex Resources on August 29, 2024 and sell it today you would earn a total of 197.00 from holding Parex Resources or generate 15.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Sage Potash Corp vs. Parex Resources
Performance |
| Timeline |
| Sage Potash Corp |
| Parex Resources |
Sage Potash and Parex Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sage Potash and Parex Resources
The main advantage of trading using opposite Sage Potash and Parex Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sage Potash position performs unexpectedly, Parex Resources 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 Parex Resources will offset losses from the drop in Parex Resources' 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 |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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