Correlation Between Suncor Energy and Shopify

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

By analyzing existing cross correlation between Suncor Energy and Shopify, you can compare the effects of market volatilities on Suncor Energy and Shopify 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 Suncor Energy with a short position of Shopify. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suncor Energy and Shopify.

Diversification Opportunities for Suncor Energy and Shopify

0.4

Correlation Coefficient

Suncor Energy  Shopify

Very weak diversification

The 3 months correlation between Suncor and Shopify is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Suncor Energy and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify and Suncor Energy 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 Suncor Energy are associated (or correlated) with Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of Suncor Energy i.e., Suncor Energy and Shopify go up and down completely randomly.

Pair Corralation between Suncor Energy and Shopify

Assuming the 90 days horizon Suncor Energy is expected to generate 0.47 times more return on investment than Shopify. However, Suncor Energy is 2.14 times less risky than Shopify. It trades about 0.1 of its potential returns per unit of risk. Shopify is currently generating about -0.03 per unit of risk. If you would invest  5,033  in Suncor Energy on December 30, 2024 and sell it today you would earn a total of  459.00  from holding Suncor Energy or generate 9.12% return on investment over 90 days.

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

Suncor Energy  vs.  Shopify

Suncor Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suncor Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Suncor Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Shopify

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shopify has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Suncor Energy and Shopify

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

The idea behind Suncor Energy and Shopify 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.