Correlation Between Sage Potash and Cameco Corp

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

Diversification Opportunities for Sage Potash and Cameco Corp

-0.58

Correlation Coefficient

Sage Potash  Cameco Corp

Excellent diversification

The 3 months correlation between Sage and Cameco is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Cameco Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cameco Corp 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 Cameco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cameco Corp has no effect on the direction of Sage Potash i.e., Sage Potash and Cameco Corp go up and down completely randomly.

Pair Corralation between Sage Potash and Cameco Corp

Assuming the 90 days trading horizon Sage Potash Corp is expected to under-perform the Cameco Corp. In addition to that, Sage Potash is 2.56 times more volatile than Cameco Corp. It trades about -0.01 of its total potential returns per unit of risk. Cameco Corp is currently generating about 0.23 per unit of volatility. If you would invest  5,475  in Cameco Corp on September 17, 2024 and sell it today you would earn a total of  2,253  from holding Cameco Corp or generate 41.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Sage Potash Corp  vs.  Cameco Corp

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 fairly stable technical and fundamental indicators, Sage Potash is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Cameco Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cameco Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Cameco Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sage Potash and Cameco Corp

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

The idea behind Sage Potash Corp and Cameco 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.