Correlation Between SunOpta and First Community

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

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

Diversification Opportunities for SunOpta and First Community

0.61

Correlation Coefficient

SunOpta  First Community

Poor diversification

The 3 months correlation between SunOpta and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding SunOpta and First Community Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Banc 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 First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community Banc has no effect on the direction of SunOpta i.e., SunOpta and First Community go up and down completely randomly.

Pair Corralation between SunOpta and First Community

Given the investment horizon of 90 days SunOpta is expected to generate 1.41 times more return on investment than First Community. However, SunOpta is 1.41 times more volatile than First Community Bancshares. It trades about 0.06 of its potential returns per unit of risk. First Community Bancshares is currently generating about 0.04 per unit of risk. If you would invest  541.00  in SunOpta on October 2, 2024 and sell it today you would earn a total of  229.00  from holding SunOpta or generate 42.33% return on investment over 90 days.

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

SunOpta  vs.  First Community Bancshares

SunOpta

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 9 (%) 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.

First Community Banc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Community Bancshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, First Community is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SunOpta and First Community

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

The idea behind SunOpta and First Community Bancshares 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.