Correlation Between Real Brands and Medical Marijuana
Can any of the company-specific risk be diversified away by investing in both Real Brands and Medical Marijuana 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 Real Brands and Medical Marijuana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Real Brands and Medical Marijuana I, you can compare the effects of market volatilities on Real Brands and Medical Marijuana 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 Real Brands with a short position of Medical Marijuana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Brands and Medical Marijuana.
Diversification Opportunities for Real Brands and Medical Marijuana
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Real and Medical is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Real Brands and Medical Marijuana I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Marijuana and Real Brands 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 Real Brands are associated (or correlated) with Medical Marijuana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Marijuana has no effect on the direction of Real Brands i.e., Real Brands and Medical Marijuana go up and down completely randomly.
Pair Corralation between Real Brands and Medical Marijuana
Given the investment horizon of 90 days Real Brands is expected to generate 2.46 times more return on investment than Medical Marijuana. However, Real Brands is 2.46 times more volatile than Medical Marijuana I. It trades about 0.14 of its potential returns per unit of risk. Medical Marijuana I is currently generating about -0.09 per unit of risk. If you would invest 0.01 in Real Brands on September 3, 2024 and sell it today you would earn a total of 0.00 from holding Real Brands or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Real Brands vs. Medical Marijuana I
Performance |
| Timeline |
| Real Brands |
| Medical Marijuana |
Real Brands and Medical Marijuana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Real Brands and Medical Marijuana
The main advantage of trading using opposite Real Brands and Medical Marijuana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Brands position performs unexpectedly, Medical Marijuana 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 Medical Marijuana will offset losses from the drop in Medical Marijuana's long position.| Real Brands vs. American Premium Water | Real Brands vs. Puration | Real Brands vs. Kona Gold Solutions | Real Brands vs. Leafbuyer Technologies |
| Medical Marijuana vs. American Green | Medical Marijuana vs. North American Cannabis | Medical Marijuana vs. Marijuana | Medical Marijuana vs. Rimrock Gold 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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