Correlation Between Aurora Cannabis and Canopy Growth

Can any of the company-specific risk be diversified away by investing in both Aurora Cannabis and Canopy Growth 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 Aurora Cannabis and Canopy Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aurora Cannabis and Canopy Growth Corp, you can compare the effects of market volatilities on Aurora Cannabis and Canopy Growth 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 Aurora Cannabis with a short position of Canopy Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Cannabis and Canopy Growth.

Diversification Opportunities for Aurora Cannabis and Canopy Growth

0.85

Correlation Coefficient

Aurora Cannabis  Canopy Growth

Very poor diversification

The 3 months correlation between Aurora and Canopy is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Cannabis and Canopy Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canopy Growth Corp and Aurora Cannabis 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 Aurora Cannabis are associated (or correlated) with Canopy Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canopy Growth Corp has no effect on the direction of Aurora Cannabis i.e., Aurora Cannabis and Canopy Growth go up and down completely randomly.

Pair Corralation between Aurora Cannabis and Canopy Growth

Considering the 90-day investment horizon Aurora Cannabis is expected to under-perform the Canopy Growth. But the stock apears to be less risky and, when comparing its historical volatility, Aurora Cannabis is 1.38 times less risky than Canopy Growth. The stock trades about -0.09 of its potential returns per unit of risk. The Canopy Growth Corp is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  504.00  in Canopy Growth Corp on August 31, 2024 and sell it today you would lose (114.00) from holding Canopy Growth Corp or give up 22.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Aurora Cannabis  vs.  Canopy Growth Corp

Aurora Cannabis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Cannabis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Canopy Growth Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canopy Growth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Aurora Cannabis and Canopy Growth

The main advantage of trading using opposite Aurora Cannabis and Canopy Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Cannabis position performs unexpectedly, Canopy Growth 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 Canopy Growth will offset losses from the drop in Canopy Growth's long position.

The idea behind Aurora Cannabis and Canopy Growth Corp 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.

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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.