Correlation Between SunOpta and Kits Eyecare

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

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

Diversification Opportunities for SunOpta and Kits Eyecare

-0.9

Correlation Coefficient

SunOpta  Kits Eyecare

Pay attention - limited upside

The 3 months correlation between SunOpta and Kits is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding SunOpta and Kits Eyecare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kits Eyecare and SunOpta 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 SunOpta are associated (or correlated) with Kits Eyecare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kits Eyecare has no effect on the direction of SunOpta i.e., SunOpta and Kits Eyecare go up and down completely randomly.

Pair Corralation between SunOpta and Kits Eyecare

Assuming the 90 days trading horizon SunOpta is expected to generate 1.47 times more return on investment than Kits Eyecare. However, SunOpta is 1.47 times more volatile than Kits Eyecare. It trades about 0.27 of its potential returns per unit of risk. Kits Eyecare is currently generating about -0.2 per unit of risk. If you would invest  831.00  in SunOpta on September 27, 2024 and sell it today you would earn a total of  290.00  from holding SunOpta or generate 34.9% return on investment over 90 days.

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

SunOpta  vs.  Kits Eyecare

SunOpta

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, SunOpta displayed solid returns over the last few months and may actually be approaching a breakup point.

Kits Eyecare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SunOpta and Kits Eyecare

The main advantage of trading using opposite SunOpta and Kits Eyecare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SunOpta position performs unexpectedly, Kits Eyecare 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 Kits Eyecare will offset losses from the drop in Kits Eyecare's long position.

The idea behind SunOpta and Kits Eyecare 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.