Correlation Between Rocky Mountain and SunOpta

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

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

Diversification Opportunities for Rocky Mountain and SunOpta

0.07

Correlation Coefficient

Rocky Mountain  SunOpta

Significant diversification

The 3 months correlation between Rocky and SunOpta is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Chocolate and SunOpta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunOpta and Rocky Mountain 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 Rocky Mountain Chocolate 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 Rocky Mountain i.e., Rocky Mountain and SunOpta go up and down completely randomly.

Pair Corralation between Rocky Mountain and SunOpta

Given the investment horizon of 90 days Rocky Mountain is expected to generate 2.05 times less return on investment than SunOpta. In addition to that, Rocky Mountain is 1.43 times more volatile than SunOpta. It trades about 0.03 of its total potential returns per unit of risk. SunOpta is currently generating about 0.1 per unit of volatility. If you would invest  520.00  in SunOpta on October 25, 2024 and sell it today you would earn a total of  205.00  from holding SunOpta or generate 39.42% return on investment over 90 days.

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

Rocky Mountain Chocolate  vs.  SunOpta

Rocky Mountain Chocolate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Mountain Chocolate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SunOpta

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 12 (%) 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 Rocky Mountain and SunOpta

The main advantage of trading using opposite Rocky Mountain and SunOpta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Mountain 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 Rocky Mountain Chocolate 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.