Correlation Between American Cannabis and Equifax

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

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

Diversification Opportunities for American Cannabis and Equifax

0.83

Correlation Coefficient

American Cannabis  Equifax

Very poor diversification

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

Pair Corralation between American Cannabis and Equifax

Given the investment horizon of 90 days American Cannabis is expected to generate 16.76 times more return on investment than Equifax. However, American Cannabis is 16.76 times more volatile than Equifax. It trades about 0.07 of its potential returns per unit of risk. Equifax is currently generating about 0.04 per unit of risk. If you would invest  2.00  in American Cannabis on September 12, 2024 and sell it today you would lose (1.98) from holding American Cannabis or give up 99.0% of portfolio value over 90 days.

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

American Cannabis  vs.  Equifax

American Cannabis

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Cannabis are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, American Cannabis revealed solid returns over the last few months and may actually be approaching a breakup point.

Equifax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with American Cannabis and Equifax

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

The idea behind American Cannabis and Equifax 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.