The research, published in the journal, Addiction, also showed for the first time that there is sufficient evidence to demonstrate that for patients who already have schizophrenia, cannabis makes their symptoms worse.
More than two million people in England and Wales used cannabis in the past 12 months, but the latest research shows that banning the drug would have low impact on mental health.
In order to prevent just one case of psychosis, more than 20,000 people would have to stop using cannabis, as shown by a previous study led by the University of Bristol.
This means that at a population level, an increased risk of psychosis from cannabis use is low, and those vulnerable to developing serious mental health problems is relatively rare. The research highlights, however, that more reviews on the impact of high potency cannabis is needed in order to make a full assessment of the risks.
Ian Hamilton, lecturer in mental health at the University of York, said: "The link between cannabis and psychosis has been an ongoing research topic since the drug became popular in the 1960s. Most of the high profile studies that we have access to, however, are from a time when low potency cannabis was the norm, but today high potency is more common.
"High potency cannabis contains less of a chemical that is believed to protect against negative side-effects, such as psychosis, and a higher level of a chemical that can trigger psychosis. In this new study, we looked at both low and high potency, but it is clear that we need more evidence from high potency-related health cases to further investigate this link in modern-day users."
Despite this, the research was clear that the more high potency cannabis used, the higher the risk of developing mental health problems, even if they are relatively low in number. For those who already had schizophrenia cannabis exacerbated the symptoms.
The greatest risk to health, however, comes from cannabis users who combine the drug with tobacco. This exposes young people in particular to tobacco dependency at an early age, increasing the chances of cancers, infections, and other health-related issues.
Previous research at York showed that regulating cannabis use could result in more effective strategies aimed at helping drug users to access the right support and guidance. The policy report illustrated, however, that there is too much uncertainly around treatment regimes in an unregulated market to target the appropriate level of care.
Mr Hamilton said: "Regulation could help reduce the risks to health that cannabis use poses, as a regulated cannabis market would introduce some quality control.
"This would provide users with information about the strength of cannabis on offer, something they usually only discover after exposure in the current unregulated market.
"The public health message about the link between cannabis and psychosis has been a difficult one to communicate, but the evidence still points to the benefits of regulations that seek to advise on the greatest potential health risks, which currently arise due to tobacco use."