Correlation Between WELL Health and Aurora Cannabis
Can any of the company-specific risk be diversified away by investing in both WELL Health 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 WELL Health and Aurora Cannabis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WELL Health Technologies and Aurora Cannabis, you can compare the effects of market volatilities on WELL Health 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 WELL Health with a short position of Aurora Cannabis. Check out your portfolio center. Please also check ongoing floating volatility patterns of WELL Health and Aurora Cannabis.
Diversification Opportunities for WELL Health and Aurora Cannabis
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between WELL and Aurora is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding WELL Health Technologies and Aurora Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Cannabis and WELL Health 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 WELL Health Technologies 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 WELL Health i.e., WELL Health and Aurora Cannabis go up and down completely randomly.
Pair Corralation between WELL Health and Aurora Cannabis
Assuming the 90 days trading horizon WELL Health Technologies is expected to generate 1.03 times more return on investment than Aurora Cannabis. However, WELL Health is 1.03 times more volatile than Aurora Cannabis. It trades about -0.22 of its potential returns per unit of risk. Aurora Cannabis is currently generating about -0.27 per unit of risk. If you would invest 706.00 in WELL Health Technologies on November 2, 2024 and sell it today you would lose (84.00) from holding WELL Health Technologies or give up 11.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
WELL Health Technologies vs. Aurora Cannabis
Performance |
| Timeline |
| WELL Health Technologies |
| Aurora Cannabis |
WELL Health and Aurora Cannabis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WELL Health and Aurora Cannabis
The main advantage of trading using opposite WELL Health and Aurora Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WELL Health 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.The idea behind WELL Health Technologies and Aurora Cannabis 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.| 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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