Correlation Between Canopy Growth and Amedisys

Can any of the company-specific risk be diversified away by investing in both Canopy Growth and Amedisys 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 Amedisys 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 Amedisys, you can compare the effects of market volatilities on Canopy Growth and Amedisys 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 Amedisys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canopy Growth and Amedisys.

Diversification Opportunities for Canopy Growth and Amedisys

0.32

Correlation Coefficient

Canopy Growth  Amedisys

Weak diversification

The 1 month correlation between Canopy and Amedisys is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Canopy Growth Corp and Amedisys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amedisys 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 Amedisys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amedisys has no effect on the direction of Canopy Growth i.e., Canopy Growth and Amedisys go up and down completely randomly.

Pair Corralation between Canopy Growth and Amedisys

Considering the 90-day investment horizon Canopy Growth Corp is expected to generate 4.75 times more return on investment than Amedisys. However, Canopy Growth is 4.75 times more volatile than Amedisys. It trades about 0.01 of its potential returns per unit of risk. Amedisys is currently generating about -0.02 per unit of risk. If you would invest  5,520  in Canopy Growth Corp on February 9, 2024 and sell it today you would lose (4,617) from holding Canopy Growth Corp or give up 83.64% of portfolio value over 90 days.

Time Period	1 Month [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Canopy Growth Corp  vs.  Amedisys

Canopy Growth Corp

Risk-Adjusted Performance

5 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canopy Growth Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Canopy Growth exhibited solid returns over the last few months and may actually be approaching a breakup point.

Amedisys

Risk-Adjusted Performance

8 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Amedisys are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Amedisys is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Canopy Growth and Amedisys

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

The idea behind Canopy Growth Corp and Amedisys 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.