Correlation Between Nouveau Life and Medical Cannabis

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

By analyzing existing cross correlation between Nouveau Life Pharmaceuticals and Medical Cannabis Pay, you can compare the effects of market volatilities on Nouveau Life and Medical Cannabis 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 Nouveau Life with a short position of Medical Cannabis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nouveau Life and Medical Cannabis.

Diversification Opportunities for Nouveau Life and Medical Cannabis

0.15

Correlation Coefficient

Nouveau Life  Medical Cannabis

Average diversification

The 3 months correlation between Nouveau and Medical is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Nouveau Life Pharmaceuticals and Medical Cannabis Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Cannabis Pay and Nouveau Life 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 Nouveau Life Pharmaceuticals are associated (or correlated) with Medical Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Cannabis Pay has no effect on the direction of Nouveau Life i.e., Nouveau Life and Medical Cannabis go up and down completely randomly.

Pair Corralation between Nouveau Life and Medical Cannabis

Given the investment horizon of 90 days Nouveau Life is expected to generate 7.64 times less return on investment than Medical Cannabis. But when comparing it to its historical volatility, Nouveau Life Pharmaceuticals is 3.44 times less risky than Medical Cannabis. It trades about 0.11 of its potential returns per unit of risk. Medical Cannabis Pay is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  0.12  in Medical Cannabis Pay on September 4, 2024 and sell it today you would lose (0.11) from holding Medical Cannabis Pay or give up 91.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Nouveau Life Pharmaceuticals  vs.  Medical Cannabis Pay

Nouveau Life Pharmac

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nouveau Life Pharmaceuticals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Nouveau Life showed solid returns over the last few months and may actually be approaching a breakup point.

Medical Cannabis Pay

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Cannabis Pay are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Medical Cannabis reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nouveau Life and Medical Cannabis

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

The idea behind Nouveau Life Pharmaceuticals and Medical Cannabis Pay 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.