Correlation Between THC Therapeutics and CannTrust Holdings

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

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

Diversification Opportunities for THC Therapeutics and CannTrust Holdings

-0.22

Correlation Coefficient

THC Therapeutics  CannTrust Holdings

Very good diversification

The 3 months correlation between THC and CannTrust is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding THC Therapeutics and CannTrust Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CannTrust Holdings and THC Therapeutics 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 THC Therapeutics are associated (or correlated) with CannTrust Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CannTrust Holdings has no effect on the direction of THC Therapeutics i.e., THC Therapeutics and CannTrust Holdings go up and down completely randomly.

Pair Corralation between THC Therapeutics and CannTrust Holdings

If you would invest  0.30  in THC Therapeutics on September 20, 2024 and sell it today you would lose (0.23) from holding THC Therapeutics or give up 76.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

THC Therapeutics  vs.  CannTrust Holdings

THC Therapeutics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in THC Therapeutics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental indicators, THC Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

CannTrust Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CannTrust Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, CannTrust Holdings is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with THC Therapeutics and CannTrust Holdings

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

The idea behind THC Therapeutics and CannTrust Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.