Correlation Between Blue Diamond and American Cannabis
Can any of the company-specific risk be diversified away by investing in both Blue Diamond and American Cannabis 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 Blue Diamond and American Cannabis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Diamond Ventures and American Cannabis, you can compare the effects of market volatilities on Blue Diamond and American Cannabis 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 Blue Diamond with a short position of American Cannabis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Diamond and American Cannabis.
Diversification Opportunities for Blue Diamond and American Cannabis
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Blue and American is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Blue Diamond Ventures and American Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Cannabis and Blue Diamond 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 Blue Diamond Ventures are associated (or correlated) with American Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Cannabis has no effect on the direction of Blue Diamond i.e., Blue Diamond and American Cannabis go up and down completely randomly.
Pair Corralation between Blue Diamond and American Cannabis
Given the investment horizon of 90 days Blue Diamond Ventures is expected to generate 1.07 times more return on investment than American Cannabis. However, Blue Diamond is 1.07 times more volatile than American Cannabis. It trades about 0.11 of its potential returns per unit of risk. American Cannabis is currently generating about 0.05 per unit of risk. If you would invest 0.05 in Blue Diamond Ventures on August 25, 2024 and sell it today you would lose (0.04) from holding Blue Diamond Ventures or give up 80.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Diamond Ventures vs. American Cannabis
Performance |
| Timeline |
| Blue Diamond Ventures |
| American Cannabis |
Blue Diamond and American Cannabis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Diamond and American Cannabis
The main advantage of trading using opposite Blue Diamond and American Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Diamond position performs unexpectedly, American Cannabis 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 Cannabis will offset losses from the drop in American Cannabis' long position.| Blue Diamond vs. Sack Lunch Productions | Blue Diamond vs. Potash America | Blue Diamond vs. Daniels Corporate Advisory | Blue Diamond vs. AimRite Holdings Corp |
| American Cannabis vs. AimRite Holdings Corp | American Cannabis vs. Sack Lunch Productions | American Cannabis vs. American Diversified Holdings | American Cannabis vs. Booz Allen Hamilton |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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