Correlation Between SunOpta and Linamar

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

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

Diversification Opportunities for SunOpta and Linamar

-0.43

Correlation Coefficient

SunOpta  Linamar

Very good diversification

The 3 months correlation between SunOpta and Linamar is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding SunOpta and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar 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 Linamar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linamar has no effect on the direction of SunOpta i.e., SunOpta and Linamar go up and down completely randomly.

Pair Corralation between SunOpta and Linamar

Assuming the 90 days trading horizon SunOpta is expected to generate 1.95 times more return on investment than Linamar. However, SunOpta is 1.95 times more volatile than Linamar. It trades about 0.01 of its potential returns per unit of risk. Linamar is currently generating about 0.01 per unit of risk. If you would invest  1,227  in SunOpta on August 24, 2024 and sell it today you would lose (137.00) from holding SunOpta or give up 11.17% of portfolio value over 90 days.

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

SunOpta  vs.  Linamar

SunOpta

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, SunOpta displayed solid returns over the last few months and may actually be approaching a breakup point.

Linamar

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SunOpta and Linamar

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

The idea behind SunOpta and Linamar 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.