Correlation Between SunOpta and Hongli Group

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

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

Diversification Opportunities for SunOpta and Hongli Group

-0.06

Correlation Coefficient

SunOpta  Hongli Group

Good diversification

The 3 months correlation between SunOpta and Hongli is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding SunOpta and Hongli Group Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongli Group Ordinary 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 Hongli Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongli Group Ordinary has no effect on the direction of SunOpta i.e., SunOpta and Hongli Group go up and down completely randomly.

Pair Corralation between SunOpta and Hongli Group

Given the investment horizon of 90 days SunOpta is expected to generate 2.65 times less return on investment than Hongli Group. But when comparing it to its historical volatility, SunOpta is 2.37 times less risky than Hongli Group. It trades about 0.01 of its potential returns per unit of risk. Hongli Group Ordinary is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  350.00  in Hongli Group Ordinary on September 14, 2024 and sell it today you would lose (214.00) from holding Hongli Group Ordinary or give up 61.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.45%
Values	Daily Returns

SunOpta  vs.  Hongli Group Ordinary

SunOpta

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 7 (%) 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.

Hongli Group Ordinary

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hongli Group Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with SunOpta and Hongli Group

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

The idea behind SunOpta and Hongli Group Ordinary 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.