Correlation Between Davis Commodities and SunOpta

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

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

Diversification Opportunities for Davis Commodities and SunOpta

-0.66

Correlation Coefficient

Davis Commodities  SunOpta

Excellent diversification

The 3 months correlation between Davis and SunOpta is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Davis Commodities Limited and SunOpta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunOpta and Davis Commodities 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 Davis Commodities Limited 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 Davis Commodities i.e., Davis Commodities and SunOpta go up and down completely randomly.

Pair Corralation between Davis Commodities and SunOpta

Given the investment horizon of 90 days Davis Commodities is expected to generate 1.18 times less return on investment than SunOpta. In addition to that, Davis Commodities is 3.77 times more volatile than SunOpta. It trades about 0.03 of its total potential returns per unit of risk. SunOpta is currently generating about 0.15 per unit of volatility. If you would invest  754.00  in SunOpta on September 15, 2024 and sell it today you would earn a total of  33.00  from holding SunOpta or generate 4.38% return on investment over 90 days.

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

Davis Commodities Limited  vs.  SunOpta

Davis Commodities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Davis Commodities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Davis Commodities is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

SunOpta

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 8 (%) 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 Davis Commodities and SunOpta

The main advantage of trading using opposite Davis Commodities and SunOpta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Commodities 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 Davis Commodities Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.