Correlation Between Sack Lunch and American Cannabis

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

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

Diversification Opportunities for Sack Lunch and American Cannabis

-0.04

Correlation Coefficient

Sack Lunch  American Cannabis

Good diversification

The 3 months correlation between Sack and American is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sack Lunch Productions and American Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Cannabis and Sack Lunch 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 Sack Lunch Productions are associated (or correlated) with American Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Cannabis has no effect on the direction of Sack Lunch i.e., Sack Lunch and American Cannabis go up and down completely randomly.

Pair Corralation between Sack Lunch and American Cannabis

Given the investment horizon of 90 days Sack Lunch Productions is expected to under-perform the American Cannabis. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sack Lunch Productions is 6.34 times less risky than American Cannabis. The pink sheet trades about -0.05 of its potential returns per unit of risk. The American Cannabis is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.50  in American Cannabis on September 3, 2024 and sell it today you would lose (0.48) from holding American Cannabis or give up 96.0% of portfolio value over 90 days.

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

Sack Lunch Productions  vs.  American Cannabis

Sack Lunch Productions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sack Lunch Productions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

American Cannabis

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Cannabis are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, American Cannabis revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sack Lunch and American Cannabis

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

The idea behind Sack Lunch Productions and American Cannabis 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.