Correlation Between Cann American and StateHouse Holdings

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

Diversification Opportunities for Cann American and StateHouse Holdings

0.12

Correlation Coefficient

Cann American  StateHouse Holdings

Average diversification

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

Pair Corralation between Cann American and StateHouse Holdings

Given the investment horizon of 90 days Cann American is expected to generate 4.93 times less return on investment than StateHouse Holdings. But when comparing it to its historical volatility, Cann American Corp is 4.04 times less risky than StateHouse Holdings. It trades about 0.07 of its potential returns per unit of risk. StateHouse Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2.50  in StateHouse Holdings on September 12, 2024 and sell it today you would lose (1.00) from holding StateHouse Holdings or give up 40.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Cann American Corp  vs.  StateHouse Holdings

Cann American Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cann American Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

StateHouse Holdings

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days StateHouse Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, StateHouse Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cann American and StateHouse Holdings

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

The idea behind Cann American Corp and StateHouse Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..