Correlation Between American Cannabis and Potash America
Can any of the company-specific risk be diversified away by investing in both American Cannabis and Potash America 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 Potash America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Cannabis and Potash America, you can compare the effects of market volatilities on American Cannabis and Potash America 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 Potash America. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Cannabis and Potash America.
Diversification Opportunities for American Cannabis and Potash America
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Potash is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding American Cannabis and Potash America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potash America 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 Potash America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potash America has no effect on the direction of American Cannabis i.e., American Cannabis and Potash America go up and down completely randomly.
Pair Corralation between American Cannabis and Potash America
Given the investment horizon of 90 days American Cannabis is expected to generate 19.9 times more return on investment than Potash America. However, American Cannabis is 19.9 times more volatile than Potash America. It trades about 0.25 of its potential returns per unit of risk. Potash America is currently generating about 0.13 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 Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Cannabis vs. Potash America
Performance |
| Timeline |
| American Cannabis |
| Potash America |
American Cannabis and Potash America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Cannabis and Potash America
The main advantage of trading using opposite American Cannabis and Potash America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Cannabis position performs unexpectedly, Potash America 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 Potash America will offset losses from the drop in Potash America'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 |
| Potash America vs. Ascendant Resources | Potash America vs. Cantex Mine Development | Potash America vs. Amarc Resources | Potash America vs. Sterling Metals Corp |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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