Correlation Between Canopy Growth and Zomedica Pharmaceuticals

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

Diversification Opportunities for Canopy Growth and Zomedica Pharmaceuticals

-0.32

Correlation Coefficient

Canopy Growth  Zomedica Pharmaceuticals

Very good diversification

The 3 months correlation between Canopy and Zomedica is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Canopy Growth Corp and Zomedica Pharmaceuticals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zomedica Pharmaceuticals 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 Zomedica Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zomedica Pharmaceuticals has no effect on the direction of Canopy Growth i.e., Canopy Growth and Zomedica Pharmaceuticals go up and down completely randomly.

Pair Corralation between Canopy Growth and Zomedica Pharmaceuticals

Considering the 90-day investment horizon Canopy Growth Corp is expected to under-perform the Zomedica Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Canopy Growth Corp is 1.43 times less risky than Zomedica Pharmaceuticals. The stock trades about -0.35 of its potential returns per unit of risk. The Zomedica Pharmaceuticals Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Zomedica Pharmaceuticals Corp on October 25, 2024 and sell it today you would earn a total of  1.00  from holding Zomedica Pharmaceuticals Corp or generate 8.33% return on investment over 90 days.

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

Canopy Growth Corp  vs.  Zomedica Pharmaceuticals Corp

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

Zomedica Pharmaceuticals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zomedica Pharmaceuticals Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Zomedica Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canopy Growth and Zomedica Pharmaceuticals

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

The idea behind Canopy Growth Corp and Zomedica Pharmaceuticals Corp 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 Stocks Directory module to find actively traded stocks across global markets.