Correlation Between Sage Potash and Ovintiv

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

Diversification Opportunities for Sage Potash and Ovintiv

-0.27

Correlation Coefficient

Sage Potash  Ovintiv

Very good diversification

The 3 months correlation between Sage and Ovintiv is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Ovintiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ovintiv 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 Ovintiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ovintiv has no effect on the direction of Sage Potash i.e., Sage Potash and Ovintiv go up and down completely randomly.

Pair Corralation between Sage Potash and Ovintiv

Assuming the 90 days trading horizon Sage Potash Corp is expected to generate 3.02 times more return on investment than Ovintiv. However, Sage Potash is 3.02 times more volatile than Ovintiv. It trades about 0.07 of its potential returns per unit of risk. Ovintiv is currently generating about 0.05 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sage Potash Corp  vs.  Ovintiv

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.

Ovintiv

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ovintiv are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ovintiv may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sage Potash and Ovintiv

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

The idea behind Sage Potash Corp and Ovintiv 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.