Correlation Between Canopy Growth and OrganiGram Holdings

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

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

Diversification Opportunities for Canopy Growth and OrganiGram Holdings

0.83

Correlation Coefficient

Canopy Growth  OrganiGram Holdings

Very poor diversification

The 3 months correlation between Canopy and OrganiGram is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Canopy Growth Corp and OrganiGram Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OrganiGram Holdings and Canopy Growth 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 Canopy Growth Corp are associated (or correlated) with OrganiGram Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OrganiGram Holdings has no effect on the direction of Canopy Growth i.e., Canopy Growth and OrganiGram Holdings go up and down completely randomly.

Pair Corralation between Canopy Growth and OrganiGram Holdings

Assuming the 90 days trading horizon Canopy Growth Corp is expected to generate 1.95 times more return on investment than OrganiGram Holdings. However, Canopy Growth is 1.95 times more volatile than OrganiGram Holdings. It trades about 0.0 of its potential returns per unit of risk. OrganiGram Holdings is currently generating about -0.01 per unit of risk. If you would invest  3,140  in Canopy Growth Corp on September 20, 2024 and sell it today you would lose (2,733) from holding Canopy Growth Corp or give up 87.04% of portfolio value over 90 days.

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

Canopy Growth Corp  vs.  OrganiGram Holdings

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.

OrganiGram Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OrganiGram Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Canopy Growth and OrganiGram Holdings

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

The idea behind Canopy Growth Corp and OrganiGram Holdings 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.