Correlation Between SunOpta and Black Mammoth

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

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

Diversification Opportunities for SunOpta and Black Mammoth

0.4

Correlation Coefficient

SunOpta  Black Mammoth

Very weak diversification

The 3 months correlation between SunOpta and Black is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SunOpta and Black Mammoth Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Mammoth Metals 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 Black Mammoth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Mammoth Metals has no effect on the direction of SunOpta i.e., SunOpta and Black Mammoth go up and down completely randomly.

Pair Corralation between SunOpta and Black Mammoth

Given the investment horizon of 90 days SunOpta is expected to under-perform the Black Mammoth. But the stock apears to be less risky and, when comparing its historical volatility, SunOpta is 2.33 times less risky than Black Mammoth. The stock trades about -0.01 of its potential returns per unit of risk. The Black Mammoth Metals is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Black Mammoth Metals on January 26, 2024 and sell it today you would earn a total of  10.30  from holding Black Mammoth Metals or generate 33.23% return on investment over 90 days.

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

SunOpta  vs.  Black Mammoth Metals

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.

Black Mammoth Metals

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Black Mammoth Metals are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Black Mammoth reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SunOpta and Black Mammoth

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

The idea behind SunOpta and Black Mammoth Metals 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.