Correlation Between Lowes Companies and Aurora Cannabis
Can any of the company-specific risk be diversified away by investing in both Lowes Companies and Aurora Cannabis 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 Lowes Companies and Aurora Cannabis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and Aurora Cannabis, you can compare the effects of market volatilities on Lowes Companies and Aurora Cannabis 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 Lowes Companies with a short position of Aurora Cannabis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and Aurora Cannabis.
Diversification Opportunities for Lowes Companies and Aurora Cannabis
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lowes and Aurora is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and Aurora Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Cannabis and Lowes Companies 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 Lowes Companies are associated (or correlated) with Aurora Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Cannabis has no effect on the direction of Lowes Companies i.e., Lowes Companies and Aurora Cannabis go up and down completely randomly.
Pair Corralation between Lowes Companies and Aurora Cannabis
Considering the 90-day investment horizon Lowes Companies is expected to under-perform the Aurora Cannabis. But the stock apears to be less risky and, when comparing its historical volatility, Lowes Companies is 10.05 times less risky than Aurora Cannabis. The stock trades about -0.08 of its potential returns per unit of risk. The Aurora Cannabis is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 370.00 in Aurora Cannabis on February 15, 2024 and sell it today you would earn a total of 334.00 from holding Aurora Cannabis or generate 90.27% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 97.62% |
Values | Daily Returns |
Lowes Companies vs. Aurora Cannabis
Performance |
Timeline |
Lowes Companies |
Aurora Cannabis |
Lowes Companies and Aurora Cannabis Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lowes Companies and Aurora Cannabis
The main advantage of trading using opposite Lowes Companies and Aurora Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies position performs unexpectedly, Aurora Cannabis 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 Aurora Cannabis will offset losses from the drop in Aurora Cannabis' long position.Lowes Companies vs. Floor Decor Holdings | Lowes Companies vs. LL Flooring Holdings | Lowes Companies vs. Arhaus Inc | Lowes Companies vs. Haverty Furniture Companies |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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