Correlation Between Aurora Cannabis and Canopy Growth
Can any of the company-specific risk be diversified away by investing in both Aurora Cannabis and Canopy Growth 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 Aurora Cannabis and Canopy Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aurora Cannabis and Canopy Growth Corp, you can compare the effects of market volatilities on Aurora Cannabis and Canopy Growth 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 Aurora Cannabis with a short position of Canopy Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Cannabis and Canopy Growth.
Diversification Opportunities for Aurora Cannabis and Canopy Growth
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Aurora and Canopy is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Cannabis and Canopy Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canopy Growth Corp and Aurora Cannabis 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 Aurora Cannabis are associated (or correlated) with Canopy Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canopy Growth Corp has no effect on the direction of Aurora Cannabis i.e., Aurora Cannabis and Canopy Growth go up and down completely randomly.
Pair Corralation between Aurora Cannabis and Canopy Growth
Assuming the 90 days trading horizon Aurora Cannabis is expected to generate 0.77 times more return on investment than Canopy Growth. However, Aurora Cannabis is 1.29 times less risky than Canopy Growth. It trades about -0.26 of its potential returns per unit of risk. Canopy Growth Corp is currently generating about -0.28 per unit of risk. If you would invest 834.00 in Aurora Cannabis on September 4, 2024 and sell it today you would lose (184.00) from holding Aurora Cannabis or give up 22.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aurora Cannabis vs. Canopy Growth Corp
Performance |
| Timeline |
| Aurora Cannabis |
| Canopy Growth Corp |
Aurora Cannabis and Canopy Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aurora Cannabis and Canopy Growth
The main advantage of trading using opposite Aurora Cannabis and Canopy Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Cannabis position performs unexpectedly, Canopy Growth 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 Canopy Growth will offset losses from the drop in Canopy Growth's long position.| Aurora Cannabis vs. Gildan Activewear | Aurora Cannabis vs. Open Text Corp | Aurora Cannabis vs. Waste Connections | Aurora Cannabis vs. CCL Industries |
| Canopy Growth vs. Aurora Cannabis | Canopy Growth vs. Cronos Group | Canopy Growth vs. Air Canada | Canopy Growth vs. Shopify |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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