Correlation Between Sage Potash and CHEVRON CDR

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

Diversification Opportunities for Sage Potash and CHEVRON CDR

0.46

Correlation Coefficient

Sage Potash  CHEVRON CDR

Very weak diversification

The 3 months correlation between Sage and CHEVRON is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and CHEVRON CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHEVRON CDR 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 CHEVRON CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHEVRON CDR has no effect on the direction of Sage Potash i.e., Sage Potash and CHEVRON CDR go up and down completely randomly.

Pair Corralation between Sage Potash and CHEVRON CDR

Assuming the 90 days trading horizon Sage Potash Corp is expected to generate 5.14 times more return on investment than CHEVRON CDR. However, Sage Potash is 5.14 times more volatile than CHEVRON CDR. It trades about 0.07 of its potential returns per unit of risk. CHEVRON CDR is currently generating about 0.17 per unit of risk. If you would invest  23.00  in Sage Potash Corp on December 30, 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Sage Potash Corp  vs.  CHEVRON CDR

Sage Potash Corp

Risk-Adjusted Performance

Modest

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.

CHEVRON CDR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHEVRON CDR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, CHEVRON CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sage Potash and CHEVRON CDR

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

The idea behind Sage Potash Corp and CHEVRON CDR 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.