Correlation Between Sage Potash and Hemisphere Energy

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

Diversification Opportunities for Sage Potash and Hemisphere Energy

-0.38

Correlation Coefficient

Sage Potash  Hemisphere Energy

Very good diversification

The 3 months correlation between Sage and Hemisphere is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Hemisphere Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hemisphere 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 Hemisphere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hemisphere Energy has no effect on the direction of Sage Potash i.e., Sage Potash and Hemisphere Energy go up and down completely randomly.

Pair Corralation between Sage Potash and Hemisphere Energy

Assuming the 90 days trading horizon Sage Potash Corp is expected to generate 3.54 times more return on investment than Hemisphere Energy. However, Sage Potash is 3.54 times more volatile than Hemisphere Energy. It trades about 0.03 of its potential returns per unit of risk. Hemisphere Energy is currently generating about 0.1 per unit of risk. If you would invest  21.00  in Sage Potash Corp on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Sage Potash Corp or generate 0.0% 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.  Hemisphere Energy

Sage Potash Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sage Potash Corp are ranked lower than 2 (%) 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.

Hemisphere Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hemisphere Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hemisphere Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sage Potash and Hemisphere Energy

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

The idea behind Sage Potash Corp and Hemisphere 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .