Correlation Between American Cannabis and CV Sciences

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

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

Diversification Opportunities for American Cannabis and CV Sciences

-0.13

Correlation Coefficient

American Cannabis  CV Sciences

Good diversification

The 3 months correlation between American and CVSI is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding American Cannabis and CV Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CV Sciences and American 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 American Cannabis are associated (or correlated) with CV Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CV Sciences has no effect on the direction of American Cannabis i.e., American Cannabis and CV Sciences go up and down completely randomly.

Pair Corralation between American Cannabis and CV Sciences

Given the investment horizon of 90 days American Cannabis is expected to generate 12.1 times more return on investment than CV Sciences. However, American Cannabis is 12.1 times more volatile than CV Sciences. It trades about 0.2 of its potential returns per unit of risk. CV Sciences is currently generating about 0.07 per unit of risk. If you would invest  0.10  in American Cannabis on December 28, 2024 and sell it today you would earn a total of  0.00  from holding American Cannabis or generate 0.0% return on investment over 90 days.

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

American Cannabis  vs.  CV Sciences

American Cannabis

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Cannabis are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, American Cannabis revealed solid returns over the last few months and may actually be approaching a breakup point.

CV Sciences

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CV Sciences are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CV Sciences demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Cannabis and CV Sciences

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

The idea behind American Cannabis and CV Sciences 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.