Correlation Between Willow Biosciences and North American

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

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

Diversification Opportunities for Willow Biosciences and North American

0.0

Correlation Coefficient

Willow Biosciences  North American

Pay attention - limited upside

The 3 months correlation between Willow and North is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Willow Biosciences and North American Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Cannabis and Willow Biosciences 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 Willow Biosciences are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Cannabis has no effect on the direction of Willow Biosciences i.e., Willow Biosciences and North American go up and down completely randomly.

Pair Corralation between Willow Biosciences and North American

Assuming the 90 days horizon Willow Biosciences is expected to generate 553.9 times less return on investment than North American. But when comparing it to its historical volatility, Willow Biosciences is 41.17 times less risky than North American. It trades about 0.02 of its potential returns per unit of risk. North American Cannabis is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  0.01  in North American Cannabis on September 14, 2024 and sell it today you would lose (0.01) from holding North American Cannabis or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Willow Biosciences  vs.  North American Cannabis

Willow Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willow Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

North American Cannabis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days North American Cannabis has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady primary indicators, North American is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Willow Biosciences and North American

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

The idea behind Willow Biosciences and North American Cannabis 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.