Correlation Between Canopy Growth and OrganiGram Holdings

Can any of the company-specific risk be diversified away by investing in both Canopy Growth and OrganiGram Holdings 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 OrganiGram Holdings 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 OrganiGram Holdings, you can compare the effects of market volatilities on Canopy Growth and OrganiGram Holdings 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 OrganiGram Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canopy Growth and OrganiGram Holdings.

Diversification Opportunities for Canopy Growth and OrganiGram Holdings

0.79

Correlation Coefficient

Canopy Growth  OrganiGram Holdings

Poor diversification

The 3 months correlation between Canopy and OrganiGram is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Canopy Growth Corp and OrganiGram Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OrganiGram 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 OrganiGram Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OrganiGram Holdings has no effect on the direction of Canopy Growth i.e., Canopy Growth and OrganiGram Holdings go up and down completely randomly.

Pair Corralation between Canopy Growth and OrganiGram Holdings

Considering the 90-day investment horizon Canopy Growth Corp is expected to under-perform the OrganiGram Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Canopy Growth Corp is 1.23 times less risky than OrganiGram Holdings. The stock trades about -0.48 of its potential returns per unit of risk. The OrganiGram Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  152.00  in OrganiGram Holdings on October 1, 2024 and sell it today you would earn a total of  9.00  from holding OrganiGram Holdings or generate 5.92% return on investment over 90 days.

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

Canopy Growth Corp  vs.  OrganiGram Holdings

Canopy Growth Corp

Risk-Adjusted Performance

0 of 100

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

OrganiGram Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OrganiGram Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, OrganiGram Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Canopy Growth and OrganiGram Holdings

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

The idea behind Canopy Growth Corp and OrganiGram 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.