Correlation Between SunOpta and Farmmi

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

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

Diversification Opportunities for SunOpta and Farmmi

-0.46

Correlation Coefficient

SunOpta  Farmmi

Very good diversification

The 3 months correlation between SunOpta and Farmmi is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding SunOpta and Farmmi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmmi Inc 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 Farmmi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmmi Inc has no effect on the direction of SunOpta i.e., SunOpta and Farmmi go up and down completely randomly.

Pair Corralation between SunOpta and Farmmi

Given the investment horizon of 90 days SunOpta is expected to generate 1.15 times more return on investment than Farmmi. However, SunOpta is 1.15 times more volatile than Farmmi Inc. It trades about 0.09 of its potential returns per unit of risk. Farmmi Inc is currently generating about -0.2 per unit of risk. If you would invest  601.00  in SunOpta on January 29, 2024 and sell it today you would earn a total of  68.00  from holding SunOpta or generate 11.31% return on investment over 90 days.

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

SunOpta  vs.  Farmmi Inc

SunOpta

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SunOpta are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile forward-looking signals, SunOpta disclosed solid returns over the last few months and may actually be approaching a breakup point.

Farmmi Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farmmi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with SunOpta and Farmmi

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

The idea behind SunOpta and Farmmi Inc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.