Correlation Between POTX and Cambria Cannabis

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

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

Diversification Opportunities for POTX and Cambria Cannabis

0.59

Correlation Coefficient

POTX  Cambria Cannabis

Very weak diversification

The 3 months correlation between POTX and Cambria is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding POTX and Cambria Cannabis ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Cannabis ETF and POTX 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 POTX are associated (or correlated) with Cambria Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Cannabis ETF has no effect on the direction of POTX i.e., POTX and Cambria Cannabis go up and down completely randomly.

Pair Corralation between POTX and Cambria Cannabis

If you would invest  619.00  in POTX on September 5, 2024 and sell it today you would earn a total of  0.00  from holding POTX or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

POTX  vs.  Cambria Cannabis ETF

POTX

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cambria Cannabis ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambria Cannabis ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Cambria Cannabis is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with POTX and Cambria Cannabis

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

The idea behind POTX and Cambria Cannabis ETF 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.