Correlation Between National Bank and SunOpta

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

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

Diversification Opportunities for National Bank and SunOpta

0.7

Correlation Coefficient

National Bank  SunOpta

Poor diversification

The 3 months correlation between National and SunOpta is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and SunOpta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunOpta and National Bank 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 National Bank of 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 National Bank i.e., National Bank and SunOpta go up and down completely randomly.

Pair Corralation between National Bank and SunOpta

Assuming the 90 days horizon National Bank is expected to generate 3.59 times less return on investment than SunOpta. But when comparing it to its historical volatility, National Bank of is 3.54 times less risky than SunOpta. It trades about 0.12 of its potential returns per unit of risk. SunOpta is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  904.00  in SunOpta on September 13, 2024 and sell it today you would earn a total of  199.00  from holding SunOpta or generate 22.01% return on investment over 90 days.

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

National Bank of  vs.  SunOpta

National Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank of are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, National Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with National Bank and SunOpta

The main advantage of trading using opposite National Bank and SunOpta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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 National Bank of 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.