Correlation Between Sage Potash and Exxon

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

Diversification Opportunities for Sage Potash and Exxon

0.48

Correlation Coefficient

Sage Potash  Exxon

Very weak diversification

The 3 months correlation between Sage and Exxon is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and EXXON MOBIL CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXXON MOBIL 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EXXON MOBIL CDR has no effect on the direction of Sage Potash i.e., Sage Potash and Exxon go up and down completely randomly.

Pair Corralation between Sage Potash and Exxon

Assuming the 90 days trading horizon Sage Potash Corp is expected to generate 4.09 times more return on investment than Exxon. However, Sage Potash is 4.09 times more volatile than EXXON MOBIL CDR. It trades about 0.07 of its potential returns per unit of risk. EXXON MOBIL CDR is currently generating about 0.1 per unit of risk. If you would invest  23.00  in Sage Potash Corp on December 29, 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.  EXXON MOBIL 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.

EXXON MOBIL CDR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EXXON MOBIL CDR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sage Potash and Exxon

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

The idea behind Sage Potash Corp and EXXON MOBIL 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.