Correlation Between Cann American and CLS Holdings

Can any of the company-specific risk be diversified away by investing in both Cann American and CLS 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 Cann American and CLS Holdings 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 CLS Holdings USA, you can compare the effects of market volatilities on Cann American and CLS 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 Cann American with a short position of CLS Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cann American and CLS Holdings.

Diversification Opportunities for Cann American and CLS Holdings

-0.12

Correlation Coefficient

Cann American  CLS Holdings

Good diversification

The 3 months correlation between Cann and CLS is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Cann American Corp and CLS Holdings USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLS Holdings USA 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 CLS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLS Holdings USA has no effect on the direction of Cann American i.e., Cann American and CLS Holdings go up and down completely randomly.

Pair Corralation between Cann American and CLS Holdings

Given the investment horizon of 90 days Cann American Corp is expected to generate 2.31 times more return on investment than CLS Holdings. However, Cann American is 2.31 times more volatile than CLS Holdings USA. It trades about 0.19 of its potential returns per unit of risk. CLS Holdings USA is currently generating about 0.09 per unit of risk. If you would invest  0.19  in Cann American Corp on December 1, 2024 and sell it today you would earn a total of  0.18  from holding Cann American Corp or generate 94.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Cann American Corp  vs.  CLS Holdings USA

Cann American Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cann American Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Cann American sustained solid returns over the last few months and may actually be approaching a breakup point.

CLS Holdings USA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Cann American and CLS Holdings

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

The idea behind Cann American Corp and CLS Holdings USA 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.