Correlation Between Medical Marijuana and Hemp

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

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

Diversification Opportunities for Medical Marijuana and Hemp

0.0

Correlation Coefficient

Medical Marijuana  Hemp

Pay attention - limited upside

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

Pair Corralation between Medical Marijuana and Hemp

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	99.21%
Values	Daily Returns

Medical Marijuana I  vs.  Hemp Inc

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.

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.

Pair Trading with Medical Marijuana and Hemp

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

The idea behind Medical Marijuana I and Hemp Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.