Correlation Between Canopy Growth and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Canopy Growth and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Canopy Growth and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canopy Growth and Dow Jones.
Diversification Opportunities for Canopy Growth and Dow Jones
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Canopy and Dow is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Canopy Growth Corp and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Canopy Growth i.e., Canopy Growth and Dow Jones go up and down completely randomly.
Pair Corralation between Canopy Growth and Dow Jones
Assuming the 90 days trading horizon Canopy Growth Corp is expected to under-perform the Dow Jones. In addition to that, Canopy Growth is 5.85 times more volatile than Dow Jones Industrial. It trades about -0.27 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.01 per unit of volatility. If you would invest 4,395,819 in Dow Jones Industrial on September 14, 2024 and sell it today you would lose (4,407) from holding Dow Jones Industrial or give up 0.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Canopy Growth Corp vs. Dow Jones Industrial
Performance |
| Timeline |
Canopy Growth and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Canopy Growth Corp
Pair trading matchups for Canopy Growth
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Canopy Growth and Dow Jones
The main advantage of trading using opposite Canopy Growth and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canopy Growth position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Canopy Growth vs. Aurora Cannabis | Canopy Growth vs. Cronos Group | Canopy Growth vs. Air Canada | Canopy Growth vs. Shopify |
| Dow Jones vs. Hurco Companies | Dow Jones vs. Tyson Foods | Dow Jones vs. MYR Group | Dow Jones vs. Cannae Holdings |
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 CEOs Directory module to screen CEOs from public companies around the world.
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