Correlation Between American Helium and Gensource Potash

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

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

Diversification Opportunities for American Helium and Gensource Potash

0.73

Correlation Coefficient

American Helium  Gensource Potash

Poor diversification

The 3 months correlation between American and Gensource is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding American Helium and Gensource Potash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gensource Potash and American Helium 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 American Helium are associated (or correlated) with Gensource Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gensource Potash has no effect on the direction of American Helium i.e., American Helium and Gensource Potash go up and down completely randomly.

Pair Corralation between American Helium and Gensource Potash

Assuming the 90 days horizon American Helium is expected to generate 31.45 times less return on investment than Gensource Potash. But when comparing it to its historical volatility, American Helium is 22.76 times less risky than Gensource Potash. It trades about 0.1 of its potential returns per unit of risk. Gensource Potash is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Gensource Potash on December 30, 2024 and sell it today you would earn a total of  4.00  from holding Gensource Potash or generate 133.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.38%
Values	Daily Returns

American Helium  vs.  Gensource Potash

American Helium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Helium are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, American Helium reported solid returns over the last few months and may actually be approaching a breakup point.

Gensource Potash

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gensource Potash are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Gensource Potash reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Helium and Gensource Potash

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

The idea behind American Helium and Gensource Potash 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.

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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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.