Correlation Between SNDL and American Copper

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

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

Diversification Opportunities for SNDL and American Copper

0.46

Correlation Coefficient

SNDL  American Copper

Very weak diversification

The 3 months correlation between SNDL and American is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding SNDL Inc and American Copper Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Copper Deve and SNDL 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 SNDL Inc are associated (or correlated) with American Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Copper Deve has no effect on the direction of SNDL i.e., SNDL and American Copper go up and down completely randomly.

Pair Corralation between SNDL and American Copper

Given the investment horizon of 90 days SNDL is expected to generate 23.67 times less return on investment than American Copper. But when comparing it to its historical volatility, SNDL Inc is 4.58 times less risky than American Copper. It trades about 0.01 of its potential returns per unit of risk. American Copper Development is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  20.00  in American Copper Development on October 11, 2024 and sell it today you would lose (17.72) from holding American Copper Development or give up 88.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.73%
Values	Daily Returns

SNDL Inc  vs.  American Copper Development

SNDL Inc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days SNDL Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, SNDL is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

American Copper Deve

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Copper Development are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, American Copper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SNDL and American Copper

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

The idea behind SNDL Inc and American Copper Development 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.