Correlation Between Cann American and Indo Global

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

Diversification Opportunities for Cann American and Indo Global

0.6

Correlation Coefficient

Cann American  Indo Global

Poor diversification

The 3 months correlation between Cann and Indo is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cann American Corp and Indo Global Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Global Exchange 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 Indo Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Global Exchange has no effect on the direction of Cann American i.e., Cann American and Indo Global go up and down completely randomly.

Pair Corralation between Cann American and Indo Global

Given the investment horizon of 90 days Cann American Corp is expected to generate 2.4 times more return on investment than Indo Global. However, Cann American is 2.4 times more volatile than Indo Global Exchange. It trades about 0.06 of its potential returns per unit of risk. Indo Global Exchange is currently generating about 0.04 per unit of risk. If you would invest  0.40  in Cann American Corp on December 27, 2024 and sell it today you would lose (0.02) from holding Cann American Corp or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Cann American Corp  vs.  Indo Global Exchange

Cann American Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cann American Corp are ranked lower than 4 (%) 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.

Indo Global Exchange

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indo Global Exchange are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Indo Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cann American and Indo Global

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

The idea behind Cann American Corp and Indo Global Exchange 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 Transaction History module to view history of all your transactions and understand their impact on performance.