Correlation Between SunOpta and Frontier Group

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

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

Diversification Opportunities for SunOpta and Frontier Group

-0.01

Correlation Coefficient

SunOpta  Frontier Group

Good diversification

The 3 months correlation between SunOpta and Frontier is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding SunOpta and Frontier Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Group Holdings 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 Frontier Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Group Holdings has no effect on the direction of SunOpta i.e., SunOpta and Frontier Group go up and down completely randomly.

Pair Corralation between SunOpta and Frontier Group

Given the investment horizon of 90 days SunOpta is expected to under-perform the Frontier Group. But the stock apears to be less risky and, when comparing its historical volatility, SunOpta is 2.01 times less risky than Frontier Group. The stock trades about -0.18 of its potential returns per unit of risk. The Frontier Group Holdings is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  712.00  in Frontier Group Holdings on October 24, 2024 and sell it today you would earn a total of  141.00  from holding Frontier Group Holdings or generate 19.8% return on investment over 90 days.

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

SunOpta  vs.  Frontier Group Holdings

SunOpta

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 12 (%) 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.

Frontier Group Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Group Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Frontier Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SunOpta and Frontier Group

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

The idea behind SunOpta and Frontier Group Holdings 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.