Correlation Between Sage Potash and Anfield Resources

Can any of the company-specific risk be diversified away by investing in both Sage Potash and Anfield 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 Anfield 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 Anfield Resources, you can compare the effects of market volatilities on Sage Potash and Anfield 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 Anfield Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sage Potash and Anfield Resources.

Diversification Opportunities for Sage Potash and Anfield Resources

-0.51

Correlation Coefficient

Sage Potash  Anfield Resources

Excellent diversification

The 3 months correlation between Sage and Anfield is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Anfield Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anfield 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 Anfield Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anfield Resources has no effect on the direction of Sage Potash i.e., Sage Potash and Anfield Resources go up and down completely randomly.

Pair Corralation between Sage Potash and Anfield Resources

Assuming the 90 days trading horizon Sage Potash Corp is expected to under-perform the Anfield Resources. But the stock apears to be less risky and, when comparing its historical volatility, Sage Potash Corp is 1.57 times less risky than Anfield Resources. The stock trades about -0.02 of its potential returns per unit of risk. The Anfield Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Anfield Resources on September 15, 2024 and sell it today you would earn a total of  2.00  from holding Anfield Resources or generate 28.57% return on investment over 90 days.

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

Sage Potash Corp  vs.  Anfield Resources

Sage Potash Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sage Potash Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Anfield Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Anfield Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Anfield Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sage Potash and Anfield Resources

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

The idea behind Sage Potash Corp and Anfield Resources 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.