Correlation Between Aurora Cannabis and ACADIA Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Aurora Cannabis and ACADIA 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 Aurora Cannabis and ACADIA Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aurora Cannabis and ACADIA Pharmaceuticals, you can compare the effects of market volatilities on Aurora Cannabis and ACADIA 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 Aurora Cannabis with a short position of ACADIA Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Cannabis and ACADIA Pharmaceuticals.
Diversification Opportunities for Aurora Cannabis and ACADIA Pharmaceuticals
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Aurora and ACADIA is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Cannabis and ACADIA Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACADIA Pharmaceuticals 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 ACADIA Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACADIA Pharmaceuticals has no effect on the direction of Aurora Cannabis i.e., Aurora Cannabis and ACADIA Pharmaceuticals go up and down completely randomly.
Pair Corralation between Aurora Cannabis and ACADIA Pharmaceuticals
Considering the 90-day investment horizon Aurora Cannabis is expected to generate 4.23 times more return on investment than ACADIA Pharmaceuticals. However, Aurora Cannabis is 4.23 times more volatile than ACADIA Pharmaceuticals. It trades about 0.2 of its potential returns per unit of risk. ACADIA Pharmaceuticals is currently generating about -0.22 per unit of risk. If you would invest 298.00 in Aurora Cannabis on February 5, 2024 and sell it today you would earn a total of 376.00 from holding Aurora Cannabis or generate 126.17% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Aurora Cannabis vs. ACADIA Pharmaceuticals
Performance |
Timeline |
Aurora Cannabis |
ACADIA Pharmaceuticals |
Aurora Cannabis and ACADIA Pharmaceuticals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Aurora Cannabis and ACADIA Pharmaceuticals
The main advantage of trading using opposite Aurora Cannabis and ACADIA Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Cannabis position performs unexpectedly, ACADIA 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 ACADIA Pharmaceuticals will offset losses from the drop in ACADIA Pharmaceuticals' long position.The idea behind Aurora Cannabis and ACADIA 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.ACADIA Pharmaceuticals vs. Quoin Pharmaceuticals Ltd | ACADIA Pharmaceuticals vs. Morningstar Unconstrained Allocation |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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