Correlation Between Canopy Growth and Evolus

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

Diversification Opportunities for Canopy Growth and Evolus

-0.59

Correlation Coefficient

Canopy Growth  Evolus

Excellent diversification

The 3 months correlation between Canopy and Evolus is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Canopy Growth Corp and Evolus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolus Inc 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 Evolus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolus Inc has no effect on the direction of Canopy Growth i.e., Canopy Growth and Evolus go up and down completely randomly.

Pair Corralation between Canopy Growth and Evolus

Considering the 90-day investment horizon Canopy Growth Corp is expected to generate 7.53 times more return on investment than Evolus. However, Canopy Growth is 7.53 times more volatile than Evolus Inc. It trades about 0.16 of its potential returns per unit of risk. Evolus Inc is currently generating about 0.0 per unit of risk. If you would invest  382.00  in Canopy Growth Corp on February 16, 2024 and sell it today you would earn a total of  609.00  from holding Canopy Growth Corp or generate 159.42% return on investment over 90 days.

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

Canopy Growth Corp  vs.  Evolus Inc

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 weak technical and fundamental indicators, Canopy Growth exhibited solid returns over the last few months and may actually be approaching a breakup point.

Evolus Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolus Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Evolus is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Canopy Growth and Evolus

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

The idea behind Canopy Growth Corp and Evolus Inc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.