Correlation Between Canopy Growth and Aurora Cannabis
Can any of the company-specific risk be diversified away by investing in both Canopy Growth and Aurora Cannabis 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 Canopy Growth and Aurora Cannabis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canopy Growth Corp and Aurora Cannabis, you can compare the effects of market volatilities on Canopy Growth and Aurora Cannabis 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 Canopy Growth with a short position of Aurora Cannabis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canopy Growth and Aurora Cannabis.
Diversification Opportunities for Canopy Growth and Aurora Cannabis
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Canopy and Aurora is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Canopy Growth Corp and Aurora Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Cannabis and Canopy Growth 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 Canopy Growth Corp are associated (or correlated) with Aurora Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Cannabis has no effect on the direction of Canopy Growth i.e., Canopy Growth and Aurora Cannabis go up and down completely randomly.
Pair Corralation between Canopy Growth and Aurora Cannabis
Assuming the 90 days trading horizon Canopy Growth Corp is expected to generate 1.42 times more return on investment than Aurora Cannabis. However, Canopy Growth is 1.42 times more volatile than Aurora Cannabis. It trades about 0.04 of its potential returns per unit of risk. Aurora Cannabis is currently generating about 0.03 per unit of risk. If you would invest 520.00 in Canopy Growth Corp on September 12, 2024 and sell it today you would lose (25.00) from holding Canopy Growth Corp or give up 4.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canopy Growth Corp vs. Aurora Cannabis
Performance |
| Timeline |
| Canopy Growth Corp |
| Aurora Cannabis |
Canopy Growth and Aurora Cannabis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canopy Growth and Aurora Cannabis
The main advantage of trading using opposite Canopy Growth and Aurora Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canopy Growth position performs unexpectedly, Aurora Cannabis 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 Aurora Cannabis will offset losses from the drop in Aurora Cannabis' long position.| Canopy Growth vs. Aurora Cannabis | Canopy Growth vs. Cronos Group | Canopy Growth vs. Air Canada | Canopy Growth vs. Shopify |
| Aurora Cannabis vs. Canopy Growth Corp | Aurora Cannabis vs. Cronos Group | Aurora Cannabis vs. Air Canada | Aurora Cannabis vs. BlackBerry |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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