Correlation Between Cannabis Sativa and Newtopia

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

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

Diversification Opportunities for Cannabis Sativa and Newtopia

0.05

Correlation Coefficient

Cannabis Sativa  Newtopia

Significant diversification

The 3 months correlation between Cannabis and Newtopia is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cannabis Sativa and Newtopia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtopia and Cannabis Sativa 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 Cannabis Sativa are associated (or correlated) with Newtopia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtopia has no effect on the direction of Cannabis Sativa i.e., Cannabis Sativa and Newtopia go up and down completely randomly.

Pair Corralation between Cannabis Sativa and Newtopia

Given the investment horizon of 90 days Cannabis Sativa is expected to under-perform the Newtopia. But the otc stock apears to be less risky and, when comparing its historical volatility, Cannabis Sativa is 1.26 times less risky than Newtopia. The otc stock trades about -0.02 of its potential returns per unit of risk. The Newtopia is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  0.56  in Newtopia on December 2, 2024 and sell it today you would lose (0.51) from holding Newtopia or give up 91.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.85%
Values	Daily Returns

Cannabis Sativa  vs.  Newtopia

Cannabis Sativa

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cannabis Sativa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Newtopia

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Cannabis Sativa and Newtopia

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

The idea behind Cannabis Sativa and Newtopia 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.