Correlation Between Now Corp and THC Therapeutics
Can any of the company-specific risk be diversified away by investing in both Now Corp and THC Therapeutics 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 Now Corp and THC Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Now Corp and THC Therapeutics, you can compare the effects of market volatilities on Now Corp and THC Therapeutics 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 Now Corp with a short position of THC Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Now Corp and THC Therapeutics.
Diversification Opportunities for Now Corp and THC Therapeutics
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Now and THC is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Now Corp and THC Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THC Therapeutics and Now Corp 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 Now Corp are associated (or correlated) with THC Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THC Therapeutics has no effect on the direction of Now Corp i.e., Now Corp and THC Therapeutics go up and down completely randomly.
Pair Corralation between Now Corp and THC Therapeutics
Given the investment horizon of 90 days Now Corp is expected to generate 1.73 times more return on investment than THC Therapeutics. However, Now Corp is 1.73 times more volatile than THC Therapeutics. It trades about 0.28 of its potential returns per unit of risk. THC Therapeutics is currently generating about 0.19 per unit of risk. If you would invest 0.02 in Now Corp on August 28, 2024 and sell it today you would lose (0.01) from holding Now Corp or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Now Corp vs. THC Therapeutics
Performance |
| Timeline |
| Now Corp |
| THC Therapeutics |
Now Corp and THC Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Now Corp and THC Therapeutics
The main advantage of trading using opposite Now Corp and THC Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Now Corp position performs unexpectedly, THC Therapeutics 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 THC Therapeutics will offset losses from the drop in THC Therapeutics' long position.The idea behind Now Corp and THC Therapeutics 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.| THC Therapeutics vs. Rezolute | THC Therapeutics vs. Tempest Therapeutics | THC Therapeutics vs. Forte Biosciences | THC Therapeutics vs. Dyadic International |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Stocks Directory Find actively traded stocks across global markets | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |