Correlation Between Canopy Growth and Electrocore LLC

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

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

Diversification Opportunities for Canopy Growth and Electrocore LLC

-0.09

Correlation Coefficient

Canopy Growth  Electrocore LLC

Good diversification

The 3 months correlation between Canopy and Electrocore is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Canopy Growth Corp and Electrocore LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electrocore LLC and Canopy Growth 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 Canopy Growth Corp are associated (or correlated) with Electrocore LLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electrocore LLC has no effect on the direction of Canopy Growth i.e., Canopy Growth and Electrocore LLC go up and down completely randomly.

Pair Corralation between Canopy Growth and Electrocore LLC

Considering the 90-day investment horizon Canopy Growth Corp is expected to generate 4.34 times more return on investment than Electrocore LLC. However, Canopy Growth is 4.34 times more volatile than Electrocore LLC. It trades about 0.16 of its potential returns per unit of risk. Electrocore LLC is currently generating about 0.0 per unit of risk. If you would invest  302.00  in Canopy Growth Corp on March 2, 2024 and sell it today you would earn a total of  551.00  from holding Canopy Growth Corp or generate 182.45% return on investment over 90 days.

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

Canopy Growth Corp  vs.  Electrocore LLC

Canopy Growth Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canopy Growth Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Canopy Growth exhibited solid returns over the last few months and may actually be approaching a breakup point.

Electrocore LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electrocore LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Electrocore LLC 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 Canopy Growth and Electrocore LLC

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

The idea behind Canopy Growth Corp and Electrocore LLC 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.