Correlation Between Incannex Healthcare and Ascend Wellness

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

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

Diversification Opportunities for Incannex Healthcare and Ascend Wellness

0.03

Correlation Coefficient

Incannex Healthcare  Ascend Wellness

Significant diversification

The 3 months correlation between Incannex and Ascend is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Incannex Healthcare Ltd and Ascend Wellness Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascend Wellness Holdings and Incannex Healthcare 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 Incannex Healthcare Ltd are associated (or correlated) with Ascend Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascend Wellness Holdings has no effect on the direction of Incannex Healthcare i.e., Incannex Healthcare and Ascend Wellness go up and down completely randomly.

Pair Corralation between Incannex Healthcare and Ascend Wellness

Given the investment horizon of 90 days Incannex Healthcare Ltd is expected to generate 0.98 times more return on investment than Ascend Wellness. However, Incannex Healthcare Ltd is 1.02 times less risky than Ascend Wellness. It trades about 0.05 of its potential returns per unit of risk. Ascend Wellness Holdings is currently generating about -0.21 per unit of risk. If you would invest  174.00  in Incannex Healthcare Ltd on September 15, 2024 and sell it today you would earn a total of  12.00  from holding Incannex Healthcare Ltd or generate 6.9% return on investment over 90 days.

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

Incannex Healthcare Ltd  vs.  Ascend Wellness Holdings

Incannex Healthcare

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Incannex Healthcare Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical indicators, Incannex Healthcare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ascend Wellness Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ascend Wellness Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Incannex Healthcare and Ascend Wellness

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

The idea behind Incannex Healthcare Ltd and Ascend Wellness Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.