Correlation Between CBOE Crude and SunOpta

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

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

Diversification Opportunities for CBOE Crude and SunOpta

-0.81

Correlation Coefficient

CBOE Crude  SunOpta

Pay attention - limited upside

The 3 months correlation between CBOE and SunOpta is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding CBOE Crude Oil and SunOpta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunOpta and CBOE Crude 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 CBOE Crude Oil 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 CBOE Crude i.e., CBOE Crude and SunOpta go up and down completely randomly.

Pair Corralation between CBOE Crude and SunOpta

Assuming the 90 days trading horizon CBOE Crude Oil is expected to under-perform the SunOpta. In addition to that, CBOE Crude is 2.54 times more volatile than SunOpta. It trades about -0.03 of its total potential returns per unit of risk. SunOpta is currently generating about 0.13 per unit of volatility. If you would invest  638.00  in SunOpta on September 29, 2024 and sell it today you would earn a total of  143.00  from holding SunOpta or generate 22.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

CBOE Crude Oil  vs.  SunOpta

Pair Trading with CBOE Crude and SunOpta

The main advantage of trading using opposite CBOE Crude and SunOpta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CBOE Crude 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 CBOE Crude Oil 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 Global Correlations module to find global opportunities by holding instruments from different markets.