Correlation Between American Cannabis and American Diversified
Can any of the company-specific risk be diversified away by investing in both American Cannabis and American Diversified 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 American Cannabis and American Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Cannabis and American Diversified Holdings, you can compare the effects of market volatilities on American Cannabis and American Diversified 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 American Cannabis with a short position of American Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Cannabis and American Diversified.
Diversification Opportunities for American Cannabis and American Diversified
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and American is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding American Cannabis and American Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Diversified and American 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 American Cannabis are associated (or correlated) with American Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Diversified has no effect on the direction of American Cannabis i.e., American Cannabis and American Diversified go up and down completely randomly.
Pair Corralation between American Cannabis and American Diversified
Given the investment horizon of 90 days American Cannabis is expected to generate 11.81 times more return on investment than American Diversified. However, American Cannabis is 11.81 times more volatile than American Diversified Holdings. It trades about 0.25 of its potential returns per unit of risk. American Diversified Holdings is currently generating about -0.42 per unit of risk. If you would invest 0.02 in American Cannabis on August 29, 2024 and sell it today you would earn a total of 0.02 from holding American Cannabis or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Cannabis vs. American Diversified Holdings
Performance |
| Timeline |
| American Cannabis |
| American Diversified |
American Cannabis and American Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Cannabis and American Diversified
The main advantage of trading using opposite American Cannabis and American Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Cannabis position performs unexpectedly, American Diversified 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 American Diversified will offset losses from the drop in American Diversified's long position.| American Cannabis vs. AimRite Holdings Corp | American Cannabis vs. Sack Lunch Productions | American Cannabis vs. American Diversified Holdings | American Cannabis vs. Booz Allen Hamilton |
| American Diversified vs. Sack Lunch Productions | American Diversified vs. Potash America | American Diversified vs. Dalrada Financial Corp | American Diversified vs. TransUnion |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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