Correlation Between Aurora Cannabis and SNDL

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Can any of the company-specific risk be diversified away by investing in both Aurora Cannabis and SNDL 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 SNDL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aurora Cannabis and SNDL Inc, you can compare the effects of market volatilities on Aurora Cannabis and SNDL 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 SNDL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Cannabis and SNDL.

Diversification Opportunities for Aurora Cannabis and SNDL

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Aurora and SNDL is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Cannabis and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc 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 SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Aurora Cannabis i.e., Aurora Cannabis and SNDL go up and down completely randomly.

Pair Corralation between Aurora Cannabis and SNDL

Considering the 90-day investment horizon Aurora Cannabis is expected to generate 1.05 times less return on investment than SNDL. In addition to that, Aurora Cannabis is 1.62 times more volatile than SNDL Inc. It trades about 0.02 of its total potential returns per unit of risk. SNDL Inc is currently generating about 0.04 per unit of volatility. If you would invest  145.00  in SNDL Inc on August 27, 2024 and sell it today you would earn a total of  53.00  from holding SNDL Inc or generate 36.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Aurora Cannabis  vs.  SNDL Inc

 Performance 
       Timeline  
Aurora Cannabis 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aurora Cannabis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
SNDL Inc 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in SNDL Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, SNDL is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Aurora Cannabis and SNDL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aurora Cannabis and SNDL

The main advantage of trading using opposite Aurora Cannabis and SNDL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Cannabis position performs unexpectedly, SNDL 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 SNDL will offset losses from the drop in SNDL's long position.
The idea behind Aurora Cannabis and SNDL 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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