Correlation Between Sage Potash and Gran Tierra

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

Diversification Opportunities for Sage Potash and Gran Tierra

-0.31

Correlation Coefficient

Sage Potash  Gran Tierra

Very good diversification

The 3 months correlation between Sage and Gran is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Gran Tierra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gran Tierra Energy 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 Gran Tierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gran Tierra Energy has no effect on the direction of Sage Potash i.e., Sage Potash and Gran Tierra go up and down completely randomly.

Pair Corralation between Sage Potash and Gran Tierra

Assuming the 90 days trading horizon Sage Potash Corp is expected to under-perform the Gran Tierra. In addition to that, Sage Potash is 2.27 times more volatile than Gran Tierra Energy. It trades about -0.01 of its total potential returns per unit of risk. Gran Tierra Energy is currently generating about 0.11 per unit of volatility. If you would invest  823.00  in Gran Tierra Energy on September 13, 2024 and sell it today you would earn a total of  155.00  from holding Gran Tierra Energy or generate 18.83% return on investment over 90 days.

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

Sage Potash Corp  vs.  Gran Tierra Energy

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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Gran Tierra Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gran Tierra Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Gran Tierra displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sage Potash and Gran Tierra

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

The idea behind Sage Potash Corp and Gran Tierra Energy 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.