Correlation Between CannaPharmaRx and Sonoma Pharmaceuticals

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

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

Diversification Opportunities for CannaPharmaRx and Sonoma Pharmaceuticals

0.01

Correlation Coefficient

CannaPharmaRx  Sonoma Pharmaceuticals

Significant diversification

The 3 months correlation between CannaPharmaRx and Sonoma is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding CannaPharmaRx and Sonoma Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonoma Pharmaceuticals and CannaPharmaRx 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 CannaPharmaRx are associated (or correlated) with Sonoma Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonoma Pharmaceuticals has no effect on the direction of CannaPharmaRx i.e., CannaPharmaRx and Sonoma Pharmaceuticals go up and down completely randomly.

Pair Corralation between CannaPharmaRx and Sonoma Pharmaceuticals

Given the investment horizon of 90 days CannaPharmaRx is expected to generate 5.47 times more return on investment than Sonoma Pharmaceuticals. However, CannaPharmaRx is 5.47 times more volatile than Sonoma Pharmaceuticals. It trades about 0.05 of its potential returns per unit of risk. Sonoma Pharmaceuticals is currently generating about -0.1 per unit of risk. If you would invest  0.80  in CannaPharmaRx on October 7, 2024 and sell it today you would lose (0.01) from holding CannaPharmaRx or give up 1.25% of portfolio value over 90 days.

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

CannaPharmaRx  vs.  Sonoma Pharmaceuticals

CannaPharmaRx

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CannaPharmaRx are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent primary indicators, CannaPharmaRx exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sonoma Pharmaceuticals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonoma Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Sonoma Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CannaPharmaRx and Sonoma Pharmaceuticals

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

The idea behind CannaPharmaRx and Sonoma Pharmaceuticals 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.