Correlation Between Arbor Metals and SunOpta

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

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

Diversification Opportunities for Arbor Metals and SunOpta

-0.35

Correlation Coefficient

Arbor Metals  SunOpta

Very good diversification

The 3 months correlation between Arbor and SunOpta is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Metals Corp and SunOpta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunOpta and Arbor Metals 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 Arbor Metals Corp are associated (or correlated) with SunOpta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunOpta has no effect on the direction of Arbor Metals i.e., Arbor Metals and SunOpta go up and down completely randomly.

Pair Corralation between Arbor Metals and SunOpta

Assuming the 90 days horizon Arbor Metals Corp is expected to under-perform the SunOpta. In addition to that, Arbor Metals is 1.63 times more volatile than SunOpta. It trades about -0.07 of its total potential returns per unit of risk. SunOpta is currently generating about -0.01 per unit of volatility. If you would invest  825.00  in SunOpta on January 26, 2024 and sell it today you would lose (157.00) from holding SunOpta or give up 19.03% of portfolio value over 90 days.

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

Arbor Metals Corp  vs.  SunOpta

Arbor Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arbor Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SunOpta

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, SunOpta disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arbor Metals and SunOpta

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

The idea behind Arbor Metals Corp and SunOpta 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.