Correlation Between Real Brands and Cann American

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

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

Diversification Opportunities for Real Brands and Cann American

0.3

Correlation Coefficient

Real Brands  Cann American

Weak diversification

The 3 months correlation between Real and Cann is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Real Brands and Cann American Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cann American Corp and Real Brands 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 Real Brands are associated (or correlated) with Cann American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cann American Corp has no effect on the direction of Real Brands i.e., Real Brands and Cann American go up and down completely randomly.

Pair Corralation between Real Brands and Cann American

Given the investment horizon of 90 days Real Brands is expected to generate 1.97 times more return on investment than Cann American. However, Real Brands is 1.97 times more volatile than Cann American Corp. It trades about 0.14 of its potential returns per unit of risk. Cann American Corp is currently generating about -0.07 per unit of risk. If you would invest  0.01  in Real Brands on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Real Brands or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Real Brands  vs.  Cann American Corp

Real Brands

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cann American Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cann American Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Cann American sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Real Brands and Cann American

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

The idea behind Real Brands and Cann American 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.

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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.