Correlation Between Falcon Energy and Sage Potash

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

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

Diversification Opportunities for Falcon Energy and Sage Potash

-0.65

Correlation Coefficient

Falcon Energy  Sage Potash

Excellent diversification

The 3 months correlation between Falcon and Sage is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Energy Materials 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 Falcon Energy 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 Falcon Energy Materials 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 Falcon Energy i.e., Falcon Energy and Sage Potash go up and down completely randomly.

Pair Corralation between Falcon Energy and Sage Potash

Assuming the 90 days trading horizon Falcon Energy Materials is expected to under-perform the Sage Potash. But the stock apears to be less risky and, when comparing its historical volatility, Falcon Energy Materials is 1.35 times less risky than Sage Potash. The stock trades about -0.09 of its potential returns per unit of risk. The Sage Potash Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Sage Potash Corp on December 20, 2024 and sell it today you would earn a total of  11.00  from holding Sage Potash Corp or generate 52.38% return on investment over 90 days.

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

Falcon Energy Materials  vs.  Sage Potash Corp

Falcon Energy Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Falcon Energy Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Sage Potash Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sage Potash Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating 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 Falcon Energy and Sage Potash

The main advantage of trading using opposite Falcon Energy and Sage Potash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Energy 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 Falcon Energy Materials 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.

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 CEOs Directory module to screen CEOs from public companies around the world.