Correlation Between Snap and Marijuana
Can any of the company-specific risk be diversified away by investing in both Snap and 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 Snap and Marijuana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Marijuana, you can compare the effects of market volatilities on Snap and 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 Snap with a short position of Marijuana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Marijuana.
Diversification Opportunities for Snap and Marijuana
Pay attention - limited upside
The 3 months correlation between Snap and Marijuana is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Marijuana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marijuana and Snap 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 Snap Inc are associated (or correlated) with Marijuana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marijuana has no effect on the direction of Snap i.e., Snap and Marijuana go up and down completely randomly.
Pair Corralation between Snap and Marijuana
Given the investment horizon of 90 days Snap is expected to generate 178.35 times less return on investment than Marijuana. But when comparing it to its historical volatility, Snap Inc is 35.1 times less risky than Marijuana. It trades about 0.03 of its potential returns per unit of risk. Marijuana is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 0.02 in Marijuana on August 30, 2024 and sell it today you would lose (0.01) from holding Marijuana or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Marijuana
Performance |
| Timeline |
| Snap Inc |
| Marijuana |
Snap and Marijuana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Marijuana
The main advantage of trading using opposite Snap and Marijuana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, 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 Marijuana will offset losses from the drop in Marijuana's long position.The idea behind Snap Inc and Marijuana 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.| 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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