Correlation Between Enbridge Pref and Sage Potash

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

By analyzing existing cross correlation between Enbridge Pref 15 and Sage Potash Corp, you can compare the effects of market volatilities on Enbridge Pref and Sage 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 Enbridge Pref with a short position of Sage Potash. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and Sage Potash.

Diversification Opportunities for Enbridge Pref and Sage Potash

-0.35

Correlation Coefficient

Enbridge Pref  Sage Potash

Very good diversification

The 3 months correlation between Enbridge and Sage is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 15 and Sage Potash Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Potash Corp and Enbridge Pref 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 Enbridge Pref 15 are associated (or correlated) with Sage Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Potash Corp has no effect on the direction of Enbridge Pref i.e., Enbridge Pref and Sage Potash go up and down completely randomly.

Pair Corralation between Enbridge Pref and Sage Potash

Assuming the 90 days trading horizon Enbridge Pref is expected to generate 27.21 times less return on investment than Sage Potash. But when comparing it to its historical volatility, Enbridge Pref 15 is 15.21 times less risky than Sage Potash. It trades about 0.04 of its potential returns per unit of risk. Sage Potash Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Sage Potash Corp on December 29, 2024 and sell it today you would earn a total of  4.00  from holding Sage Potash Corp or generate 17.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Enbridge Pref 15  vs.  Sage Potash Corp

Enbridge Pref 15

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 15 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Enbridge Pref is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sage Potash Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sage Potash Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Sage Potash showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enbridge Pref and Sage Potash

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

The idea behind Enbridge Pref 15 and Sage Potash Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.