Correlation Between SunOpta and Union Electric

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

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

Diversification Opportunities for SunOpta and Union Electric

0.19

Correlation Coefficient

SunOpta  Union Electric

Average diversification

The 3 months correlation between SunOpta and Union is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding SunOpta and Union Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Electric 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 Union Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Electric has no effect on the direction of SunOpta i.e., SunOpta and Union Electric go up and down completely randomly.

Pair Corralation between SunOpta and Union Electric

Given the investment horizon of 90 days SunOpta is expected to generate 1.98 times less return on investment than Union Electric. But when comparing it to its historical volatility, SunOpta is 1.84 times less risky than Union Electric. It trades about 0.17 of its potential returns per unit of risk. Union Electric is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  10,000  in Union Electric on September 12, 2024 and sell it today you would earn a total of  1,000.00  from holding Union Electric or generate 10.0% return on investment over 90 days.

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

SunOpta  vs.  Union Electric

SunOpta

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 10 (%) 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.

Union Electric

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Union Electric are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Union Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SunOpta and Union Electric

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

The idea behind SunOpta and Union Electric 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.