Correlation Between SunOpta and BTU Metals

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

By analyzing existing cross correlation between SunOpta and BTU Metals Corp, you can compare the effects of market volatilities on SunOpta and BTU Metals 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 BTU Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of SunOpta and BTU Metals.

Diversification Opportunities for SunOpta and BTU Metals

0.32

Correlation Coefficient

SunOpta  BTU Metals

Weak diversification

The 3 months correlation between SunOpta and BTU is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding SunOpta and BTU Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTU Metals Corp 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 BTU Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTU Metals Corp has no effect on the direction of SunOpta i.e., SunOpta and BTU Metals go up and down completely randomly.

Pair Corralation between SunOpta and BTU Metals

Given the investment horizon of 90 days SunOpta is expected to generate 0.88 times more return on investment than BTU Metals. However, SunOpta is 1.14 times less risky than BTU Metals. It trades about 0.18 of its potential returns per unit of risk. BTU Metals Corp is currently generating about 0.01 per unit of risk. If you would invest  605.00  in SunOpta on October 8, 2024 and sell it today you would earn a total of  181.00  from holding SunOpta or generate 29.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

SunOpta  vs.  BTU Metals Corp

SunOpta

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 13 (%) 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.

BTU Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BTU Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, BTU Metals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SunOpta and BTU Metals

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

The idea behind SunOpta and BTU Metals Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.