Correlation Between Flexible Solutions and SunOpta

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

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

Diversification Opportunities for Flexible Solutions and SunOpta

0.46

Correlation Coefficient

Flexible Solutions  SunOpta

Very weak diversification

The 3 months correlation between Flexible and SunOpta is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Flexible Solutions Internation and SunOpta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunOpta and Flexible Solutions 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 Flexible Solutions International 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 Flexible Solutions i.e., Flexible Solutions and SunOpta go up and down completely randomly.

Pair Corralation between Flexible Solutions and SunOpta

Considering the 90-day investment horizon Flexible Solutions International is expected to generate 1.01 times more return on investment than SunOpta. However, Flexible Solutions is 1.01 times more volatile than SunOpta. It trades about 0.04 of its potential returns per unit of risk. SunOpta is currently generating about 0.01 per unit of risk. If you would invest  281.00  in Flexible Solutions International on September 14, 2024 and sell it today you would earn a total of  110.00  from holding Flexible Solutions International or generate 39.15% return on investment over 90 days.

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

Flexible Solutions Internation  vs.  SunOpta

Flexible Solutions

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Flexible Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.

SunOpta

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 7 (%) 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 Flexible Solutions and SunOpta

The main advantage of trading using opposite Flexible Solutions and SunOpta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flexible Solutions 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 Flexible Solutions International 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.