Correlation Between Tilray and Medical Marijuana
Can any of the company-specific risk be diversified away by investing in both Tilray 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 Tilray and Medical Marijuana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tilray Inc and Medical Marijuana I, you can compare the effects of market volatilities on Tilray 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 Tilray with a short position of Medical Marijuana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tilray and Medical Marijuana.
Diversification Opportunities for Tilray and Medical Marijuana
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tilray and Medical is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Tilray Inc and Medical Marijuana I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Marijuana 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 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 Tilray i.e., Tilray and Medical Marijuana go up and down completely randomly.
Pair Corralation between Tilray and Medical Marijuana
Given the investment horizon of 90 days Tilray Inc is expected to generate 0.28 times more return on investment than Medical Marijuana. However, Tilray Inc is 3.54 times less risky than Medical Marijuana. It trades about -0.29 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 173.00 in Tilray Inc on September 3, 2024 and sell it today you would lose (39.00) from holding Tilray Inc or give up 22.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tilray Inc vs. Medical Marijuana I
Performance |
| Timeline |
| Tilray Inc |
| Medical Marijuana |
Tilray and Medical Marijuana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tilray and Medical Marijuana
The main advantage of trading using opposite Tilray and Medical Marijuana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tilray 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.The idea behind Tilray Inc and Medical Marijuana I 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.| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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