Correlation Between CV Sciences and Marijuana

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

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

Diversification Opportunities for CV Sciences and Marijuana

0.51

Correlation Coefficient

CV Sciences  Marijuana

Very weak diversification

The 3 months correlation between CVSI and Marijuana is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding CV Sciences and Marijuana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marijuana and CV Sciences 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 CV Sciences are associated (or correlated) with Marijuana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marijuana has no effect on the direction of CV Sciences i.e., CV Sciences and Marijuana go up and down completely randomly.

Pair Corralation between CV Sciences and Marijuana

Given the investment horizon of 90 days CV Sciences is expected to generate 0.8 times more return on investment than Marijuana. However, CV Sciences is 1.26 times less risky than Marijuana. It trades about -0.03 of its potential returns per unit of risk. Marijuana is currently generating about -0.13 per unit of risk. If you would invest  5.00  in CV Sciences on September 13, 2024 and sell it today you would lose (2.00) from holding CV Sciences or give up 40.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

CV Sciences  vs.  Marijuana

CV Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CV Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Marijuana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marijuana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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.

Pair Trading with CV Sciences and Marijuana

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

The idea behind CV Sciences and Marijuana 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.