Correlation Between Body and Heritage Cannabis

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

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

Diversification Opportunities for Body and Heritage Cannabis

0.15

Correlation Coefficient

Body  Heritage Cannabis

Average diversification

The 3 months correlation between Body and Heritage is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Body and Mind and Heritage Cannabis Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Cannabis and Body 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 Body and Mind are associated (or correlated) with Heritage Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Cannabis has no effect on the direction of Body i.e., Body and Heritage Cannabis go up and down completely randomly.

Pair Corralation between Body and Heritage Cannabis

Given the investment horizon of 90 days Body is expected to generate 2.89 times less return on investment than Heritage Cannabis. But when comparing it to its historical volatility, Body and Mind is 1.58 times less risky than Heritage Cannabis. It trades about 0.04 of its potential returns per unit of risk. Heritage Cannabis Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.07  in Heritage Cannabis Holdings on October 9, 2024 and sell it today you would lose (0.93) from holding Heritage Cannabis Holdings or give up 86.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	63.97%
Values	Daily Returns

Body and Mind  vs.  Heritage Cannabis Holdings

Body and Mind

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Body and Mind are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile primary indicators, Body revealed solid returns over the last few months and may actually be approaching a breakup point.

Heritage Cannabis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heritage Cannabis Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Heritage Cannabis is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Body and Heritage Cannabis

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

The idea behind Body and Mind and Heritage Cannabis Holdings 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.