Correlation Between Canopy Growth and Goodness Growth

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

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

Diversification Opportunities for Canopy Growth and Goodness Growth

0.57

Correlation Coefficient

Canopy Growth  Goodness Growth

Very weak diversification

The 3 months correlation between Canopy and Goodness is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Canopy Growth Corp and Goodness Growth Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodness Growth Holdings and Canopy Growth 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 Canopy Growth Corp are associated (or correlated) with Goodness Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodness Growth Holdings has no effect on the direction of Canopy Growth i.e., Canopy Growth and Goodness Growth go up and down completely randomly.

Pair Corralation between Canopy Growth and Goodness Growth

Considering the 90-day investment horizon Canopy Growth Corp is expected to under-perform the Goodness Growth. But the stock apears to be less risky and, when comparing its historical volatility, Canopy Growth Corp is 1.08 times less risky than Goodness Growth. The stock trades about -0.22 of its potential returns per unit of risk. The Goodness Growth Holdings is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  57.00  in Goodness Growth Holdings on December 21, 2024 and sell it today you would lose (18.00) from holding Goodness Growth Holdings or give up 31.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Canopy Growth Corp  vs.  Goodness Growth Holdings

Canopy Growth Corp

Risk-Adjusted Performance

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 inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Goodness Growth Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goodness Growth Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Canopy Growth and Goodness Growth

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

The idea behind Canopy Growth Corp and Goodness Growth 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.