Correlation Between Aurora Cannabis and Mind MedicineInc

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

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

Diversification Opportunities for Aurora Cannabis and Mind MedicineInc

0.58

Correlation Coefficient

Aurora Cannabis  Mind MedicineInc

Very weak diversification

The 3 months correlation between Aurora and Mind is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Cannabis and Mind MedicineInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mind MedicineInc and Aurora Cannabis 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 Aurora Cannabis are associated (or correlated) with Mind MedicineInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mind MedicineInc has no effect on the direction of Aurora Cannabis i.e., Aurora Cannabis and Mind MedicineInc go up and down completely randomly.

Pair Corralation between Aurora Cannabis and Mind MedicineInc

Considering the 90-day investment horizon Aurora Cannabis is expected to generate 2.62 times more return on investment than Mind MedicineInc. However, Aurora Cannabis is 2.62 times more volatile than Mind MedicineInc. It trades about 0.04 of its potential returns per unit of risk. Mind MedicineInc is currently generating about -0.05 per unit of risk. If you would invest  701.00  in Aurora Cannabis on February 7, 2024 and sell it today you would lose (27.00) from holding Aurora Cannabis or give up 3.85% of portfolio value over 90 days.

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

Aurora Cannabis  vs.  Mind MedicineInc

Aurora Cannabis

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Cannabis are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, Aurora Cannabis sustained solid returns over the last few months and may actually be approaching a breakup point.

Mind MedicineInc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mind MedicineInc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Mind MedicineInc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Cannabis and Mind MedicineInc

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

The idea behind Aurora Cannabis and Mind MedicineInc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.