Correlation Between Aurora Cannabis and OrganiGram Holdings

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

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

Diversification Opportunities for Aurora Cannabis and OrganiGram Holdings

0.97

Correlation Coefficient

Aurora Cannabis  OrganiGram Holdings

Almost no diversification

The 3 months correlation between Aurora and OrganiGram is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Cannabis and OrganiGram Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OrganiGram Holdings and Aurora Cannabis 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 Aurora Cannabis 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 Aurora Cannabis i.e., Aurora Cannabis and OrganiGram Holdings go up and down completely randomly.

Pair Corralation between Aurora Cannabis and OrganiGram Holdings

Considering the 90-day investment horizon Aurora Cannabis is expected to under-perform the OrganiGram Holdings. In addition to that, Aurora Cannabis is 1.36 times more volatile than OrganiGram Holdings. It trades about -0.09 of its total potential returns per unit of risk. OrganiGram Holdings is currently generating about -0.08 per unit of volatility. If you would invest  179.00  in OrganiGram Holdings on September 3, 2024 and sell it today you would lose (28.00) from holding OrganiGram Holdings or give up 15.64% of portfolio value over 90 days.

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

Aurora Cannabis  vs.  OrganiGram Holdings

Aurora Cannabis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Cannabis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company 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. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Aurora Cannabis and OrganiGram Holdings

The main advantage of trading using opposite Aurora Cannabis and OrganiGram Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Cannabis 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 Aurora Cannabis 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.