Correlation Between Akanda Corp and Kala Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Akanda Corp and Kala Pharmaceuticals 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 Akanda Corp and Kala Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Akanda Corp and Kala Pharmaceuticals

0.43

Correlation Coefficient

Akanda Corp  Kala Pharmaceuticals

Very weak diversification

The 3 months correlation between Akanda and Kala is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Akanda Corp and Kala Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kala Pharmaceuticals and Akanda Corp 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 Akanda Corp are associated (or correlated) with Kala Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kala Pharmaceuticals has no effect on the direction of Akanda Corp i.e., Akanda Corp and Kala Pharmaceuticals go up and down completely randomly.

Pair Corralation between Akanda Corp and Kala Pharmaceuticals

Given the investment horizon of 90 days Akanda Corp is expected to under-perform the Kala Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Akanda Corp is 1.6 times less risky than Kala Pharmaceuticals. The stock trades about -0.01 of its potential returns per unit of risk. The Kala Pharmaceuticals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  698.00  in Kala Pharmaceuticals on December 27, 2024 and sell it today you would lose (66.00) from holding Kala Pharmaceuticals or give up 9.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Akanda Corp  vs.  Kala Pharmaceuticals

Akanda Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Akanda Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Akanda Corp is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Kala Pharmaceuticals

Risk-Adjusted Performance

Weak

Over the last 90 days Kala Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Kala Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Akanda Corp and Kala Pharmaceuticals

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

The idea behind Akanda Corp and Kala Pharmaceuticals 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.