Correlation Between Aurora Cannabis and Canopy Growth

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

By analyzing existing cross correlation between Aurora Cannabis and Canopy Growth Corp, you can compare the effects of market volatilities on Aurora Cannabis and Canopy Growth 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 Canopy Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Cannabis and Canopy Growth.

Diversification Opportunities for Aurora Cannabis and Canopy Growth

0.69

Correlation Coefficient

Aurora Cannabis  Canopy Growth

Poor diversification

The 3 months correlation between Aurora and Canopy is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Cannabis and Canopy Growth Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canopy Growth Corp 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 Canopy Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canopy Growth Corp has no effect on the direction of Aurora Cannabis i.e., Aurora Cannabis and Canopy Growth go up and down completely randomly.

Pair Corralation between Aurora Cannabis and Canopy Growth

Considering the 90-day investment horizon Aurora Cannabis is expected to generate 2.09 times less return on investment than Canopy Growth. But when comparing it to its historical volatility, Aurora Cannabis is 1.61 times less risky than Canopy Growth. It trades about 0.06 of its potential returns per unit of risk. Canopy Growth Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  134.00  in Canopy Growth Corp on May 15, 2025 and sell it today you would earn a total of  30.00  from holding Canopy Growth Corp or generate 22.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Aurora Cannabis  vs.  Canopy Growth Corp

Aurora Cannabis

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Cannabis are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, Aurora Cannabis sustained solid returns over the last few months and may actually be approaching a breakup point.

Canopy Growth Corp

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Canopy Growth Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Canopy Growth exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora Cannabis and Canopy Growth

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

The idea behind Aurora Cannabis and Canopy Growth Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.