Correlation Between EGF Theramed and Cannabis Sativa

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

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

Diversification Opportunities for EGF Theramed and Cannabis Sativa

0.52

Correlation Coefficient

EGF Theramed  Cannabis Sativa

Very weak diversification

The 3 months correlation between EGF and Cannabis is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding EGF Theramed Health and Cannabis Sativa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cannabis Sativa and EGF Theramed 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 EGF Theramed Health are associated (or correlated) with Cannabis Sativa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cannabis Sativa has no effect on the direction of EGF Theramed i.e., EGF Theramed and Cannabis Sativa go up and down completely randomly.

Pair Corralation between EGF Theramed and Cannabis Sativa

Assuming the 90 days horizon EGF Theramed Health is expected to under-perform the Cannabis Sativa. In addition to that, EGF Theramed is 1.52 times more volatile than Cannabis Sativa. It trades about -0.01 of its total potential returns per unit of risk. Cannabis Sativa is currently generating about 0.19 per unit of volatility. If you would invest  5.85  in Cannabis Sativa on October 7, 2024 and sell it today you would earn a total of  2.64  from holding Cannabis Sativa or generate 45.13% return on investment over 90 days.

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

EGF Theramed Health  vs.  Cannabis Sativa

EGF Theramed Health

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EGF Theramed Health are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical indicators, EGF Theramed reported solid returns over the last few months and may actually be approaching a breakup point.

Cannabis Sativa

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cannabis Sativa are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental indicators, Cannabis Sativa unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EGF Theramed and Cannabis Sativa

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

The idea behind EGF Theramed Health and Cannabis Sativa 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.