Correlation Between Intrepid Potash and Nutrien

Can any of the company-specific risk be diversified away by investing in both Intrepid Potash and Nutrien 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 Intrepid Potash and Nutrien into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Intrepid Potash and Nutrien, you can compare the effects of market volatilities on Intrepid Potash and Nutrien 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 Intrepid Potash with a short position of Nutrien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intrepid Potash and Nutrien.

Diversification Opportunities for Intrepid Potash and Nutrien

0.59

Correlation Coefficient

Intrepid Potash  Nutrien

Very weak diversification

The 3 months correlation between Intrepid and Nutrien is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Intrepid Potash and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien and Intrepid 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 Intrepid Potash are associated (or correlated) with Nutrien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutrien has no effect on the direction of Intrepid Potash i.e., Intrepid Potash and Nutrien go up and down completely randomly.

Pair Corralation between Intrepid Potash and Nutrien

Considering the 90-day investment horizon Intrepid Potash is expected to under-perform the Nutrien. In addition to that, Intrepid Potash is 1.5 times more volatile than Nutrien. It trades about -0.05 of its total potential returns per unit of risk. Nutrien is currently generating about -0.04 per unit of volatility. If you would invest  9,534  in Nutrien on February 7, 2024 and sell it today you would lose (4,193) from holding Nutrien or give up 43.98% of portfolio value over 90 days.

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

Intrepid Potash  vs.  Nutrien

Intrepid Potash

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intrepid Potash are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Intrepid Potash demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Nutrien

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nutrien are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Nutrien may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Intrepid Potash and Nutrien

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

The idea behind Intrepid Potash and Nutrien 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.