Correlation Between THCX and Cambria Cannabis

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

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

Diversification Opportunities for THCX and Cambria Cannabis

0.35

Correlation Coefficient

THCX  Cambria Cannabis

Weak diversification

The 3 months correlation between THCX and Cambria is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding THCX 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 THCX 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 THCX 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 THCX i.e., THCX and Cambria Cannabis go up and down completely randomly.

Pair Corralation between THCX and Cambria Cannabis

If you would invest (100.00) in THCX on September 5, 2024 and sell it today you would earn a total of  100.00  from holding THCX or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.0%
Values	Daily Returns

THCX  vs.  Cambria Cannabis ETF

THCX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days THCX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, THCX is not utilizing all of its potentials. The newest 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 THCX and Cambria Cannabis

The main advantage of trading using opposite THCX and Cambria Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THCX 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 THCX 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.