Correlation Between Akanda Corp and Sonoma Pharmaceuticals

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

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

Diversification Opportunities for Akanda Corp and Sonoma Pharmaceuticals

-0.44

Correlation Coefficient

Akanda Corp  Sonoma Pharmaceuticals

Very good diversification

The 3 months correlation between Akanda and Sonoma is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Akanda Corp and Sonoma Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonoma Pharmaceuticals and Akanda Corp 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 Akanda Corp are associated (or correlated) with Sonoma Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonoma Pharmaceuticals has no effect on the direction of Akanda Corp i.e., Akanda Corp and Sonoma Pharmaceuticals go up and down completely randomly.

Pair Corralation between Akanda Corp and Sonoma Pharmaceuticals

Given the investment horizon of 90 days Akanda Corp is expected to under-perform the Sonoma Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Akanda Corp is 3.89 times less risky than Sonoma Pharmaceuticals. The stock trades about -0.08 of its potential returns per unit of risk. The Sonoma Pharmaceuticals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Sonoma Pharmaceuticals on March 18, 2024 and sell it today you would earn a total of  96.00  from holding Sonoma Pharmaceuticals or generate 564.71% return on investment over 90 days.

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

Akanda Corp  vs.  Sonoma Pharmaceuticals

Akanda Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akanda Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sonoma Pharmaceuticals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sonoma Pharmaceuticals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Sonoma Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Akanda Corp and Sonoma Pharmaceuticals

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

The idea behind Akanda Corp and Sonoma Pharmaceuticals 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.