Correlation Between North American and Medical Marijuana
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and Medical Marijuana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Cannabis and Medical Marijuana I, you can compare the effects of market volatilities on North American 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 North American with a short position of Medical Marijuana. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Medical Marijuana.
Diversification Opportunities for North American and Medical Marijuana
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between North and Medical is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding North American Cannabis and Medical Marijuana I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Marijuana and North American 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 North American Cannabis 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 North American i.e., North American and Medical Marijuana go up and down completely randomly.
Pair Corralation between North American and Medical Marijuana
Given the investment horizon of 90 days North American Cannabis is expected to generate 28.07 times more return on investment than Medical Marijuana. However, North American is 28.07 times more volatile than Medical Marijuana I. It trades about 0.25 of its potential returns per unit of risk. Medical Marijuana I is currently generating about -0.02 per unit of risk. If you would invest 0.01 in North American Cannabis on August 26, 2024 and sell it today you would lose (0.01) from holding North American Cannabis or give up 100.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
North American Cannabis vs. Medical Marijuana I
Performance |
| Timeline |
| North American Cannabis |
| Medical Marijuana |
North American and Medical Marijuana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Medical Marijuana
The main advantage of trading using opposite North American and Medical Marijuana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. Green Cures Botanical | North American vs. Galexxy Holdings | North American vs. Indoor Harvest Corp | North American vs. Speakeasy Cannabis Club |
| Medical Marijuana vs. Rezolute | Medical Marijuana vs. Tempest Therapeutics | Medical Marijuana vs. Forte Biosciences | Medical Marijuana 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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