Correlation Between Goodness Growth and Canopy Growth

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

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

Diversification Opportunities for Goodness Growth and Canopy Growth

-0.1

Correlation Coefficient

Goodness Growth  Canopy Growth

Good diversification

The 3 months correlation between Goodness and Canopy is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Goodness Growth 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 Goodness 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 Goodness Growth 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 Goodness Growth i.e., Goodness Growth and Canopy Growth go up and down completely randomly.

Pair Corralation between Goodness Growth and Canopy Growth

Assuming the 90 days horizon Goodness Growth Holdings is expected to generate 5.18 times more return on investment than Canopy Growth. However, Goodness Growth is 5.18 times more volatile than Canopy Growth Corp. It trades about 0.1 of its potential returns per unit of risk. Canopy Growth Corp is currently generating about -0.31 per unit of risk. If you would invest  41.00  in Goodness Growth Holdings on October 8, 2024 and sell it today you would earn a total of  16.00  from holding Goodness Growth Holdings or generate 39.02% return on investment over 90 days.

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

Goodness Growth Holdings  vs.  Canopy Growth Corp

Goodness Growth Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goodness Growth Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Goodness Growth reported solid returns over the last few months and may actually be approaching a breakup point.

Canopy Growth Corp

Risk-Adjusted Performance

0 of 100

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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Goodness Growth and Canopy Growth

The main advantage of trading using opposite Goodness Growth and Canopy Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodness Growth 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 Goodness Growth 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.