Correlation Between SNDL and Marchex

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

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

Diversification Opportunities for SNDL and Marchex

-0.57

Correlation Coefficient

SNDL  Marchex

Excellent diversification

The 3 months correlation between SNDL and Marchex is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding SNDL Inc and Marchex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marchex and SNDL 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 SNDL Inc are associated (or correlated) with Marchex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marchex has no effect on the direction of SNDL i.e., SNDL and Marchex go up and down completely randomly.

Pair Corralation between SNDL and Marchex

Given the investment horizon of 90 days SNDL Inc is expected to under-perform the Marchex. But the stock apears to be less risky and, when comparing its historical volatility, SNDL Inc is 1.3 times less risky than Marchex. The stock trades about -0.1 of its potential returns per unit of risk. The Marchex is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  174.00  in Marchex on September 17, 2024 and sell it today you would earn a total of  33.00  from holding Marchex or generate 18.97% return on investment over 90 days.

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

SNDL Inc  vs.  Marchex

SNDL Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SNDL Inc 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 fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Marchex

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Marchex are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical indicators, Marchex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SNDL and Marchex

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

The idea behind SNDL Inc and Marchex 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.