Correlation Between Medmen Enterprises and Lucy Scientific

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

By analyzing existing cross correlation between Medmen Enterprises Class and Lucy Scientific Discovery, you can compare the effects of market volatilities on Medmen Enterprises and Lucy Scientific 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 Medmen Enterprises with a short position of Lucy Scientific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Medmen Enterprises and Lucy Scientific.

Diversification Opportunities for Medmen Enterprises and Lucy Scientific

-0.94

Correlation Coefficient

Medmen Enterprises  Lucy Scientific

Pay attention - limited upside

The 3 months correlation between Medmen and Lucy is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Medmen Enterprises Class and Lucy Scientific Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucy Scientific Discovery and Medmen Enterprises 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 Medmen Enterprises Class are associated (or correlated) with Lucy Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucy Scientific Discovery has no effect on the direction of Medmen Enterprises i.e., Medmen Enterprises and Lucy Scientific go up and down completely randomly.

Pair Corralation between Medmen Enterprises and Lucy Scientific

Assuming the 90 days horizon Medmen Enterprises is expected to generate 4.41 times less return on investment than Lucy Scientific. But when comparing it to its historical volatility, Medmen Enterprises Class is 1.86 times less risky than Lucy Scientific. It trades about 0.04 of its potential returns per unit of risk. Lucy Scientific Discovery is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,990  in Lucy Scientific Discovery on September 5, 2024 and sell it today you would lose (2,988) from holding Lucy Scientific Discovery or give up 99.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.5%
Values	Daily Returns

Medmen Enterprises Class  vs.  Lucy Scientific Discovery

Medmen Enterprises Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medmen Enterprises Class has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Medmen Enterprises is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Lucy Scientific Discovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lucy Scientific Discovery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Lucy Scientific is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Medmen Enterprises and Lucy Scientific

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

The idea behind Medmen Enterprises Class and Lucy Scientific Discovery 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.