Correlation Between Marijuana and StateHouse Holdings

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

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

Diversification Opportunities for Marijuana and StateHouse Holdings

0.12

Correlation Coefficient

Marijuana  StateHouse Holdings

Average diversification

The 3 months correlation between Marijuana and StateHouse is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Marijuana and StateHouse Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on StateHouse Holdings and Marijuana 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 Marijuana are associated (or correlated) with StateHouse Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of StateHouse Holdings has no effect on the direction of Marijuana i.e., Marijuana and StateHouse Holdings go up and down completely randomly.

Pair Corralation between Marijuana and StateHouse Holdings

Given the investment horizon of 90 days Marijuana is expected to under-perform the StateHouse Holdings. In addition to that, Marijuana is 1.8 times more volatile than StateHouse Holdings. It trades about -0.13 of its total potential returns per unit of risk. StateHouse Holdings is currently generating about -0.06 per unit of volatility. If you would invest  2.50  in StateHouse Holdings on September 20, 2024 and sell it today you would lose (1.00) from holding StateHouse Holdings or give up 40.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Marijuana  vs.  StateHouse Holdings

Marijuana

Risk-Adjusted Performance

0 of 100

Very Weak

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

StateHouse Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days StateHouse 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 nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Marijuana and StateHouse Holdings

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

The idea behind Marijuana and StateHouse 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.