Correlation Between Pentagon I and Canopy Growth

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

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

Diversification Opportunities for Pentagon I and Canopy Growth

0.63

Correlation Coefficient

Pentagon I  Canopy Growth

Poor diversification

The 3 months correlation between Pentagon and Canopy is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pentagon I Capital 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 Pentagon I 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 Pentagon I Capital 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 Pentagon I i.e., Pentagon I and Canopy Growth go up and down completely randomly.

Pair Corralation between Pentagon I and Canopy Growth

Assuming the 90 days trading horizon Pentagon I Capital is expected to under-perform the Canopy Growth. In addition to that, Pentagon I is 4.11 times more volatile than Canopy Growth Corp. It trades about -0.16 of its total potential returns per unit of risk. Canopy Growth Corp is currently generating about -0.36 per unit of volatility. If you would invest  541.00  in Canopy Growth Corp on September 22, 2024 and sell it today you would lose (137.00) from holding Canopy Growth Corp or give up 25.32% of portfolio value over 90 days.

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

Pentagon I Capital  vs.  Canopy Growth Corp

Pentagon I Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pentagon I Capital 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 somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Pentagon I and Canopy Growth

The main advantage of trading using opposite Pentagon I and Canopy Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentagon I 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 Pentagon I Capital 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.