Correlation Between Cannabotech and Photomyne

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

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

Diversification Opportunities for Cannabotech and Photomyne

-0.79

Correlation Coefficient

Cannabotech  Photomyne

Pay attention - limited upside

The 3 months correlation between Cannabotech and Photomyne is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cannabotech and Photomyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photomyne and Cannabotech 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 Cannabotech are associated (or correlated) with Photomyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photomyne has no effect on the direction of Cannabotech i.e., Cannabotech and Photomyne go up and down completely randomly.

Pair Corralation between Cannabotech and Photomyne

Assuming the 90 days trading horizon Cannabotech is expected to under-perform the Photomyne. In addition to that, Cannabotech is 3.91 times more volatile than Photomyne. It trades about -0.17 of its total potential returns per unit of risk. Photomyne is currently generating about 0.34 per unit of volatility. If you would invest  245,300  in Photomyne on September 17, 2024 and sell it today you would earn a total of  56,100  from holding Photomyne or generate 22.87% return on investment over 90 days.

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

Cannabotech  vs.  Photomyne

Cannabotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cannabotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic 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.

Photomyne

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Photomyne are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Photomyne sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cannabotech and Photomyne

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

The idea behind Cannabotech and Photomyne 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.