Correlation Between Tilray and Canopy Growth
Can any of the company-specific risk be diversified away by investing in both Tilray and Canopy Growth 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 Tilray and Canopy Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tilray Inc and Canopy Growth Corp, you can compare the effects of market volatilities on Tilray and Canopy Growth 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 Tilray with a short position of Canopy Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tilray and Canopy Growth.
Diversification Opportunities for Tilray and Canopy Growth
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tilray and Canopy is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Tilray Inc and Canopy Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canopy Growth Corp and Tilray 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 Tilray Inc are associated (or correlated) with Canopy Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canopy Growth Corp has no effect on the direction of Tilray i.e., Tilray and Canopy Growth go up and down completely randomly.
Pair Corralation between Tilray and Canopy Growth
Given the investment horizon of 90 days Tilray Inc is expected to under-perform the Canopy Growth. But the stock apears to be less risky and, when comparing its historical volatility, Tilray Inc is 1.73 times less risky than Canopy Growth. The stock trades about -0.27 of its potential returns per unit of risk. The Canopy Growth Corp is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 504.00 in Canopy Growth Corp on August 24, 2024 and sell it today you would lose (118.00) from holding Canopy Growth Corp or give up 23.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tilray Inc vs. Canopy Growth Corp
Performance |
| Timeline |
| Tilray Inc |
| Canopy Growth Corp |
Tilray and Canopy Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tilray and Canopy Growth
The main advantage of trading using opposite Tilray and Canopy Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tilray position performs unexpectedly, Canopy Growth 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 Canopy Growth will offset losses from the drop in Canopy Growth's long position.The idea behind Tilray Inc and Canopy Growth Corp 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.| Canopy Growth vs. Aegon NV ADR | Canopy Growth vs. Anheuser Busch Inbev | Canopy Growth vs. Boston Beer | Canopy Growth vs. Bridgford Foods |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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