Correlation Between Greater Cannabis and Medicure

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

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

Diversification Opportunities for Greater Cannabis and Medicure

0.48

Correlation Coefficient

Greater Cannabis  Medicure

Very weak diversification

The 3 months correlation between Greater and Medicure is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Greater Cannabis and Medicure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicure and Greater 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 Greater Cannabis are associated (or correlated) with Medicure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicure has no effect on the direction of Greater Cannabis i.e., Greater Cannabis and Medicure go up and down completely randomly.

Pair Corralation between Greater Cannabis and Medicure

Given the investment horizon of 90 days Greater Cannabis is expected to generate 2.95 times more return on investment than Medicure. However, Greater Cannabis is 2.95 times more volatile than Medicure. It trades about 0.0 of its potential returns per unit of risk. Medicure is currently generating about -0.03 per unit of risk. If you would invest  0.07  in Greater Cannabis on September 13, 2024 and sell it today you would lose (0.03) from holding Greater Cannabis or give up 42.86% of portfolio value over 90 days.

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

Greater Cannabis  vs.  Medicure

Greater Cannabis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greater Cannabis has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Greater Cannabis is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Medicure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medicure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Greater Cannabis and Medicure

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

The idea behind Greater Cannabis and Medicure 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.