Correlation Between Flora Growth and Capricor Therapeutics

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

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

Diversification Opportunities for Flora Growth and Capricor Therapeutics

0.63

Correlation Coefficient

Flora Growth  Capricor Therapeutics

Poor diversification

The 3 months correlation between Flora and Capricor is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Flora Growth Corp and Capricor Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricor Therapeutics and Flora Growth 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 Flora Growth Corp are associated (or correlated) with Capricor Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricor Therapeutics has no effect on the direction of Flora Growth i.e., Flora Growth and Capricor Therapeutics go up and down completely randomly.

Pair Corralation between Flora Growth and Capricor Therapeutics

Given the investment horizon of 90 days Flora Growth Corp is expected to generate 0.82 times more return on investment than Capricor Therapeutics. However, Flora Growth Corp is 1.23 times less risky than Capricor Therapeutics. It trades about 0.3 of its potential returns per unit of risk. Capricor Therapeutics is currently generating about -0.11 per unit of risk. If you would invest  118.00  in Flora Growth Corp on September 13, 2024 and sell it today you would earn a total of  51.00  from holding Flora Growth Corp or generate 43.22% return on investment over 90 days.

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

Flora Growth Corp  vs.  Capricor Therapeutics

Flora Growth Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flora Growth Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Flora Growth exhibited solid returns over the last few months and may actually be approaching a breakup point.

Capricor Therapeutics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capricor Therapeutics are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Capricor Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flora Growth and Capricor Therapeutics

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

The idea behind Flora Growth Corp and Capricor Therapeutics 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.