Correlation Between Hemp and Medical Marijuana

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

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

Diversification Opportunities for Hemp and Medical Marijuana

0.0

Correlation Coefficient

Hemp  Medical Marijuana

Pay attention - limited upside

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

Pair Corralation between Hemp and Medical Marijuana

If you would invest  0.00  in Hemp Inc on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Hemp Inc or generate 0.0% return on investment over 90 days.

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

Hemp Inc  vs.  Medical Marijuana I

Hemp Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hemp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Hemp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Medical Marijuana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medical Marijuana I has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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.

Pair Trading with Hemp and Medical Marijuana

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

The idea behind Hemp Inc and Medical Marijuana I 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.