Correlation Between Arcus Biosciences and Flora Growth

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

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

Diversification Opportunities for Arcus Biosciences and Flora Growth

0.5

Correlation Coefficient

Arcus Biosciences  Flora Growth

Very weak diversification

The 3 months correlation between Arcus and Flora is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Arcus Biosciences and Flora Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flora Growth Corp and Arcus Biosciences 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 Arcus Biosciences are associated (or correlated) with Flora Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flora Growth Corp has no effect on the direction of Arcus Biosciences i.e., Arcus Biosciences and Flora Growth go up and down completely randomly.

Pair Corralation between Arcus Biosciences and Flora Growth

Given the investment horizon of 90 days Arcus Biosciences is expected to generate 0.42 times more return on investment than Flora Growth. However, Arcus Biosciences is 2.38 times less risky than Flora Growth. It trades about 0.02 of its potential returns per unit of risk. Flora Growth Corp is currently generating about 0.0 per unit of risk. If you would invest  1,527  in Arcus Biosciences on September 25, 2024 and sell it today you would earn a total of  23.00  from holding Arcus Biosciences or generate 1.51% return on investment over 90 days.

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

Arcus Biosciences  vs.  Flora Growth Corp

Arcus Biosciences

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arcus Biosciences are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Arcus Biosciences is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Flora Growth Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flora Growth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Flora Growth is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arcus Biosciences and Flora Growth

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

The idea behind Arcus Biosciences and Flora Growth Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.