Correlation Between Diversified Royalty and OrganiGram Holdings

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

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

Diversification Opportunities for Diversified Royalty and OrganiGram Holdings

-0.01

Correlation Coefficient

Diversified Royalty  OrganiGram Holdings

Good diversification

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

Pair Corralation between Diversified Royalty and OrganiGram Holdings

Assuming the 90 days trading horizon Diversified Royalty Corp is expected to under-perform the OrganiGram Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Diversified Royalty Corp is 3.08 times less risky than OrganiGram Holdings. The stock trades about -0.03 of its potential returns per unit of risk. The OrganiGram Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  223.00  in OrganiGram Holdings on October 9, 2024 and sell it today you would earn a total of  18.00  from holding OrganiGram Holdings or generate 8.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Diversified Royalty Corp  vs.  OrganiGram Holdings

Diversified Royalty Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diversified Royalty Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Diversified Royalty is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

OrganiGram Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in OrganiGram Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal forward indicators, OrganiGram Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Diversified Royalty and OrganiGram Holdings

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

The idea behind Diversified Royalty Corp and OrganiGram 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.