Correlation Between Canopy Growth and SNDL

Can any of the company-specific risk be diversified away by investing in both Canopy Growth and SNDL 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 SNDL 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 SNDL Inc, you can compare the effects of market volatilities on Canopy Growth and SNDL 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 SNDL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canopy Growth and SNDL.

Diversification Opportunities for Canopy Growth and SNDL

0.65

Correlation Coefficient

Canopy Growth  SNDL

Poor diversification

The 3 months correlation between Canopy and SNDL is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Canopy Growth Corp and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc 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 SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Canopy Growth i.e., Canopy Growth and SNDL go up and down completely randomly.

Pair Corralation between Canopy Growth and SNDL

Considering the 90-day investment horizon Canopy Growth Corp is expected to under-perform the SNDL. In addition to that, Canopy Growth is 1.64 times more volatile than SNDL Inc. It trades about -0.05 of its total potential returns per unit of risk. SNDL Inc is currently generating about 0.01 per unit of volatility. If you would invest  197.00  in SNDL Inc on August 31, 2024 and sell it today you would lose (1.00) from holding SNDL Inc or give up 0.51% of portfolio value over 90 days.

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

Canopy Growth Corp  vs.  SNDL Inc

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 fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SNDL Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SNDL Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, SNDL is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Canopy Growth and SNDL

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

The idea behind Canopy Growth Corp and SNDL Inc 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.