Correlation Between Cann American and BC Bud

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

By analyzing existing cross correlation between Cann American Corp and The BC Bud, you can compare the effects of market volatilities on Cann American and BC Bud 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 Cann American with a short position of BC Bud. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cann American and BC Bud.

Diversification Opportunities for Cann American and BC Bud

-0.83

Correlation Coefficient

Cann American  BC Bud

Pay attention - limited upside

The 3 months correlation between Cann and BCBCF is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Cann American Corp and The BC Bud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BC Bud and Cann American 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 Cann American Corp are associated (or correlated) with BC Bud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BC Bud has no effect on the direction of Cann American i.e., Cann American and BC Bud go up and down completely randomly.

Pair Corralation between Cann American and BC Bud

Given the investment horizon of 90 days Cann American is expected to generate 15.95 times less return on investment than BC Bud. But when comparing it to its historical volatility, Cann American Corp is 4.38 times less risky than BC Bud. It trades about 0.04 of its potential returns per unit of risk. The BC Bud is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.88  in The BC Bud on September 3, 2024 and sell it today you would earn a total of  3.67  from holding The BC Bud or generate 417.05% return on investment over 90 days.

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

Cann American Corp  vs.  The BC Bud

Cann American Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cann American Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Cann American sustained solid returns over the last few months and may actually be approaching a breakup point.

BC Bud

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The BC Bud are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, BC Bud reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cann American and BC Bud

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

The idea behind Cann American Corp and The BC Bud 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.