Correlation Between National Vision and Canopy Growth

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

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

Diversification Opportunities for National Vision and Canopy Growth

-0.43

Correlation Coefficient

National Vision  Canopy Growth

Very good diversification

The 3 months correlation between National and Canopy is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding National Vision Holdings and Canopy Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canopy Growth Corp and National Vision 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 National Vision Holdings are associated (or correlated) with Canopy Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canopy Growth Corp has no effect on the direction of National Vision i.e., National Vision and Canopy Growth go up and down completely randomly.

Pair Corralation between National Vision and Canopy Growth

Considering the 90-day investment horizon National Vision Holdings is expected to generate 0.48 times more return on investment than Canopy Growth. However, National Vision Holdings is 2.09 times less risky than Canopy Growth. It trades about 0.05 of its potential returns per unit of risk. Canopy Growth Corp is currently generating about -0.18 per unit of risk. If you would invest  1,026  in National Vision Holdings on December 10, 2024 and sell it today you would earn a total of  141.00  from holding National Vision Holdings or generate 13.74% return on investment over 90 days.

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

National Vision Holdings  vs.  Canopy Growth Corp

National Vision Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, National Vision is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Canopy Growth Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canopy Growth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with National Vision and Canopy Growth

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

The idea behind National Vision Holdings and Canopy Growth Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.