Correlation Between Marimed and American Cannabis

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

Diversification Opportunities for Marimed and American Cannabis

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Marimed and American is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Marimed and American Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Cannabis and Marimed 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 Marimed 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 Marimed i.e., Marimed and American Cannabis go up and down completely randomly.

Pair Corralation between Marimed and American Cannabis

Given the investment horizon of 90 days Marimed is expected to under-perform the American Cannabis. But the otc stock apears to be less risky and, when comparing its historical volatility, Marimed is 14.6 times less risky than American Cannabis. The otc stock trades about -0.01 of its potential returns per unit of risk. The American Cannabis is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  0.02  in American Cannabis on August 30, 2024 and sell it today you would earn a total of  0.01  from holding American Cannabis or generate 50.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Marimed  vs.  American Cannabis

 Performance 
       Timeline  
Marimed 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Marimed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
American Cannabis 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in American Cannabis are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, American Cannabis revealed solid returns over the last few months and may actually be approaching a breakup point.

Marimed and American Cannabis Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Marimed and American Cannabis

The main advantage of trading using opposite Marimed and American Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marimed 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.
The idea behind Marimed and American Cannabis 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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