Correlation Between Marijuana Company and American Green

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

By analyzing existing cross correlation between Marijuana and American Green, you can compare the effects of market volatilities on Marijuana Company and American Green 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 Marijuana Company with a short position of American Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marijuana Company and American Green.

Diversification Opportunities for Marijuana Company and American Green

0.0

Correlation Coefficient

Marijuana Company  American Green

Pay attention - limited upside

The 3 months correlation between Marijuana and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Marijuana and American Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Green and Marijuana Company 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 Marijuana are associated (or correlated) with American Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Green has no effect on the direction of Marijuana Company i.e., Marijuana Company and American Green go up and down completely randomly.

Pair Corralation between Marijuana Company and American Green

If you would invest  0.05  in American Green on December 2, 2024 and sell it today you would lose (0.01) from holding American Green or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.12%
Values	Daily Returns

Marijuana  vs.  American Green

Marijuana Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marijuana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Marijuana Company is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

American Green

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Green are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, American Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marijuana Company and American Green

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

The idea behind Marijuana and American Green 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.