Correlation Between American Green and Hemp

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

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

Diversification Opportunities for American Green and Hemp

0.09

Correlation Coefficient

American Green  Hemp

Significant diversification

The 3 months correlation between American and Hemp is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding American Green and Hemp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hemp Inc and American Green 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 American Green are associated (or correlated) with Hemp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hemp Inc has no effect on the direction of American Green i.e., American Green and Hemp go up and down completely randomly.

Pair Corralation between American Green and Hemp

Given the investment horizon of 90 days American Green is expected to generate 68.62 times less return on investment than Hemp. But when comparing it to its historical volatility, American Green is 8.84 times less risky than Hemp. It trades about 0.01 of its potential returns per unit of risk. Hemp Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Hemp Inc on December 28, 2024 and sell it today you would earn a total of  0.00  from holding Hemp Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

American Green  vs.  Hemp Inc

American Green

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Green are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, American Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Hemp Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hemp Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Hemp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Green and Hemp

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

The idea behind American Green and Hemp Inc 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..