Correlation Between CiT and Global Cannabis

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

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

Diversification Opportunities for CiT and Global Cannabis

0.23

Correlation Coefficient

CiT  Global Cannabis

Modest diversification

The 3 months correlation between CiT and Global is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding CiT Inc and Global Cannabis Applications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Cannabis Appl and CiT 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 CiT Inc are associated (or correlated) with Global Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Cannabis Appl has no effect on the direction of CiT i.e., CiT and Global Cannabis go up and down completely randomly.

Pair Corralation between CiT and Global Cannabis

Given the investment horizon of 90 days CiT is expected to generate 22.32 times less return on investment than Global Cannabis. But when comparing it to its historical volatility, CiT Inc is 8.37 times less risky than Global Cannabis. It trades about 0.03 of its potential returns per unit of risk. Global Cannabis Applications is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.39  in Global Cannabis Applications on December 28, 2024 and sell it today you would lose (0.09) from holding Global Cannabis Applications or give up 23.08% of portfolio value over 90 days.

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

CiT Inc  vs.  Global Cannabis Applications

CiT Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CiT Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CiT is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Global Cannabis Appl

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Cannabis Applications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Global Cannabis reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CiT and Global Cannabis

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

The idea behind CiT Inc and Global Cannabis Applications 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.