Correlation Between General Cannabis and American Green

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

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

Diversification Opportunities for General Cannabis and American Green

-0.56

Correlation Coefficient

General Cannabis  American Green

Excellent diversification

The 3 months correlation between General and American is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding General Cannabis Corp and American Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Green and General 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 General Cannabis Corp are associated (or correlated) with American Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Green has no effect on the direction of General Cannabis i.e., General Cannabis and American Green go up and down completely randomly.

Pair Corralation between General Cannabis and American Green

Given the investment horizon of 90 days General Cannabis Corp is expected to under-perform the American Green. But the otc stock apears to be less risky and, when comparing its historical volatility, General Cannabis Corp is 2.54 times less risky than American Green. The otc stock trades about -0.08 of its potential returns per unit of risk. The American Green is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.05  in American Green on September 25, 2024 and sell it today you would earn a total of  0.00  from holding American Green or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

General Cannabis Corp  vs.  American Green

General Cannabis Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Cannabis Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent 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.

American Green

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Green are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, American Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General Cannabis and American Green

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

The idea behind General Cannabis Corp and American Green 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.