Correlation Between Integrated Cannabis and Canna Consumer

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

By analyzing existing cross correlation between Integrated Cannabis Solutions and Canna Consumer Goods, you can compare the effects of market volatilities on Integrated Cannabis and Canna Consumer 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 Integrated Cannabis with a short position of Canna Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Integrated Cannabis and Canna Consumer.

Diversification Opportunities for Integrated Cannabis and Canna Consumer

0.32

Correlation Coefficient

Integrated Cannabis  Canna Consumer

Weak diversification

The 3 months correlation between Integrated and Canna is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Integrated Cannabis Solutions and Canna Consumer Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canna Consumer Goods and Integrated Cannabis 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 Integrated Cannabis Solutions are associated (or correlated) with Canna Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canna Consumer Goods has no effect on the direction of Integrated Cannabis i.e., Integrated Cannabis and Canna Consumer go up and down completely randomly.

Pair Corralation between Integrated Cannabis and Canna Consumer

Given the investment horizon of 90 days Integrated Cannabis Solutions is expected to under-perform the Canna Consumer. But the pink sheet apears to be less risky and, when comparing its historical volatility, Integrated Cannabis Solutions is 1.46 times less risky than Canna Consumer. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Canna Consumer Goods is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Canna Consumer Goods on October 10, 2024 and sell it today you would lose (3.23) from holding Canna Consumer Goods or give up 24.85% of portfolio value over 90 days.

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

Integrated Cannabis Solutions  vs.  Canna Consumer Goods

Integrated Cannabis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Integrated Cannabis Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Integrated Cannabis is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Canna Consumer Goods

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canna Consumer Goods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting primary indicators, Canna Consumer revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Integrated Cannabis and Canna Consumer

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

The idea behind Integrated Cannabis Solutions and Canna Consumer Goods 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.