Correlation Between Marijuana and Hemp
Can any of the company-specific risk be diversified away by investing in both Marijuana and Hemp 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 Marijuana and Hemp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marijuana and Hemp Inc, you can compare the effects of market volatilities on Marijuana and Hemp 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 Marijuana with a short position of Hemp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marijuana and Hemp.
Diversification Opportunities for Marijuana and Hemp
Pay attention - limited upside
The 3 months correlation between Marijuana and Hemp is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Marijuana and Hemp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hemp Inc and Marijuana 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 Marijuana are associated (or correlated) with Hemp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hemp Inc has no effect on the direction of Marijuana i.e., Marijuana and Hemp go up and down completely randomly.
Pair Corralation between Marijuana and Hemp
Given the investment horizon of 90 days Marijuana is expected to generate 2.59 times more return on investment than Hemp. However, Marijuana is 2.59 times more volatile than Hemp Inc. It trades about 0.16 of its potential returns per unit of risk. Hemp Inc is currently generating about 0.1 per unit of risk. If you would invest 0.01 in Marijuana on August 30, 2024 and sell it today you would earn a total of 0.00 from holding Marijuana or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marijuana vs. Hemp Inc
Performance |
| Timeline |
| Marijuana |
| Hemp Inc |
Marijuana and Hemp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marijuana and Hemp
The main advantage of trading using opposite Marijuana and Hemp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marijuana position performs unexpectedly, Hemp 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 Hemp will offset losses from the drop in Hemp's long position.| Marijuana vs. Priority Aviation | Marijuana vs. Cbd Life Sciences | Marijuana vs. Hemp Inc | Marijuana vs. Emergent Health 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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