Correlation Between Intrepid Potash and Nutrien

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

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

Diversification Opportunities for Intrepid Potash and Nutrien

0.72

Correlation Coefficient

Intrepid Potash  Nutrien

Poor diversification

The 3 months correlation between Intrepid and Nutrien is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Intrepid Potash and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien and Intrepid 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 Intrepid Potash are associated (or correlated) with Nutrien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutrien has no effect on the direction of Intrepid Potash i.e., Intrepid Potash and Nutrien go up and down completely randomly.

Pair Corralation between Intrepid Potash and Nutrien

Considering the 90-day investment horizon Intrepid Potash is expected to generate 1.51 times more return on investment than Nutrien. However, Intrepid Potash is 1.51 times more volatile than Nutrien. It trades about 0.2 of its potential returns per unit of risk. Nutrien is currently generating about 0.12 per unit of risk. If you would invest  2,119  in Intrepid Potash on December 29, 2024 and sell it today you would earn a total of  880.00  from holding Intrepid Potash or generate 41.53% return on investment over 90 days.

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

Intrepid Potash  vs.  Nutrien

Intrepid Potash

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Intrepid Potash are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Intrepid Potash demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Nutrien

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nutrien are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Nutrien reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intrepid Potash and Nutrien

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

The idea behind Intrepid Potash and Nutrien 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.