Correlation Between Maple Leaf and Global Hemp

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

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

Diversification Opportunities for Maple Leaf and Global Hemp

-0.12

Correlation Coefficient

Maple Leaf  Global Hemp

Good diversification

The 3 months correlation between Maple and Global is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Green and Global Hemp Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Hemp Group and Maple Leaf 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 Maple Leaf Green are associated (or correlated) with Global Hemp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Hemp Group has no effect on the direction of Maple Leaf i.e., Maple Leaf and Global Hemp go up and down completely randomly.

Pair Corralation between Maple Leaf and Global Hemp

Assuming the 90 days horizon Maple Leaf Green is expected to generate 1.25 times more return on investment than Global Hemp. However, Maple Leaf is 1.25 times more volatile than Global Hemp Group. It trades about 0.06 of its potential returns per unit of risk. Global Hemp Group is currently generating about -0.05 per unit of risk. If you would invest  3.00  in Maple Leaf Green on August 31, 2024 and sell it today you would lose (0.70) from holding Maple Leaf Green or give up 23.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Maple Leaf Green  vs.  Global Hemp Group

Maple Leaf Green

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Leaf Green are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Maple Leaf reported solid returns over the last few months and may actually be approaching a breakup point.

Global Hemp Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Hemp Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Maple Leaf and Global Hemp

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

The idea behind Maple Leaf Green and Global Hemp Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.