Correlation Between Sage Potash and Evolve Global

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

Diversification Opportunities for Sage Potash and Evolve Global

0.02

Correlation Coefficient

Sage Potash  Evolve Global

Significant diversification

The 3 months correlation between Sage and Evolve is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sage Potash Corp and Evolve Global Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve Global Materials 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 Evolve Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve Global Materials has no effect on the direction of Sage Potash i.e., Sage Potash and Evolve Global go up and down completely randomly.

Pair Corralation between Sage Potash and Evolve Global

Assuming the 90 days trading horizon Sage Potash Corp is expected to generate 14.17 times more return on investment than Evolve Global. However, Sage Potash is 14.17 times more volatile than Evolve Global Materials. It trades about 0.16 of its potential returns per unit of risk. Evolve Global Materials is currently generating about -0.13 per unit of risk. If you would invest  15.00  in Sage Potash Corp on June 14, 2024 and sell it today you would earn a total of  6.00  from holding Sage Potash Corp or generate 40.0% return on investment over 90 days.

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

Sage Potash Corp  vs.  Evolve Global Materials

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 unfluctuating technical and fundamental indicators, Sage Potash showed solid returns over the last few months and may actually be approaching a breakup point.

Evolve Global Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolve Global Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Evolve Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sage Potash and Evolve Global

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

The idea behind Sage Potash Corp and Evolve Global Materials 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.