Correlation Between Sage Potash and Denison Mines

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

Diversification Opportunities for Sage Potash and Denison Mines

-0.62

Correlation Coefficient

Sage Potash  Denison Mines

Excellent diversification

The 3 months correlation between Sage and Denison is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Denison Mines Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Denison Mines 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 Denison Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Denison Mines Corp has no effect on the direction of Sage Potash i.e., Sage Potash and Denison Mines go up and down completely randomly.

Pair Corralation between Sage Potash and Denison Mines

Assuming the 90 days trading horizon Sage Potash Corp is expected to generate 1.44 times more return on investment than Denison Mines. However, Sage Potash is 1.44 times more volatile than Denison Mines Corp. It trades about 0.26 of its potential returns per unit of risk. Denison Mines Corp is currently generating about -0.02 per unit of risk. If you would invest  21.00  in Sage Potash Corp on October 20, 2024 and sell it today you would earn a total of  6.00  from holding Sage Potash Corp or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Sage Potash Corp  vs.  Denison Mines Corp

Sage Potash Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sage Potash Corp are ranked lower than 8 (%) 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.

Denison Mines Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Denison Mines Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Sage Potash and Denison Mines

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

The idea behind Sage Potash Corp and Denison Mines 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.