Correlation Between Falcon Energy and SunOpta

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

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

Diversification Opportunities for Falcon Energy and SunOpta

0.8

Correlation Coefficient

Falcon Energy  SunOpta

Very poor diversification

The 3 months correlation between Falcon and SunOpta is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Energy Materials and SunOpta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunOpta and Falcon Energy 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 Falcon Energy Materials 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 Falcon Energy i.e., Falcon Energy and SunOpta go up and down completely randomly.

Pair Corralation between Falcon Energy and SunOpta

Assuming the 90 days trading horizon Falcon Energy Materials is expected to generate 1.94 times more return on investment than SunOpta. However, Falcon Energy is 1.94 times more volatile than SunOpta. It trades about -0.05 of its potential returns per unit of risk. SunOpta is currently generating about -0.26 per unit of risk. If you would invest  60.00  in Falcon Energy Materials on December 30, 2024 and sell it today you would lose (12.00) from holding Falcon Energy Materials or give up 20.0% of portfolio value over 90 days.

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

Falcon Energy Materials  vs.  SunOpta

Falcon Energy Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Falcon Energy Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

SunOpta

Risk-Adjusted Performance

Very Weak

Over the last 90 days SunOpta has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Falcon Energy and SunOpta

The main advantage of trading using opposite Falcon Energy and SunOpta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Energy 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 Falcon Energy Materials 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.