Correlation Between SunOpta and Arbor Metals

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

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

Diversification Opportunities for SunOpta and Arbor Metals

-0.35

Correlation Coefficient

SunOpta  Arbor Metals

Very good diversification

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

Pair Corralation between SunOpta and Arbor Metals

Given the investment horizon of 90 days SunOpta is expected to generate 0.62 times more return on investment than Arbor Metals. However, SunOpta is 1.63 times less risky than Arbor Metals. It trades about -0.01 of its potential returns per unit of risk. Arbor Metals Corp is currently generating about -0.07 per unit of risk. 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

SunOpta  vs.  Arbor Metals Corp

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.

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.

Pair Trading with SunOpta and Arbor Metals

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

The idea behind SunOpta and Arbor Metals Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..