Correlation Between Charlottes Web and Stem Holdings
Can any of the company-specific risk be diversified away by investing in both Charlottes Web and Stem Holdings 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 Charlottes Web and Stem Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charlottes Web Holdings and Stem Holdings, you can compare the effects of market volatilities on Charlottes Web and Stem Holdings 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 Charlottes Web with a short position of Stem Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charlottes Web and Stem Holdings.
Diversification Opportunities for Charlottes Web and Stem Holdings
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Charlottes and Stem is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Charlottes Web Holdings and Stem Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Holdings and Charlottes Web 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 Charlottes Web Holdings are associated (or correlated) with Stem Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Holdings has no effect on the direction of Charlottes Web i.e., Charlottes Web and Stem Holdings go up and down completely randomly.
Pair Corralation between Charlottes Web and Stem Holdings
Assuming the 90 days horizon Charlottes Web Holdings is expected to under-perform the Stem Holdings. But the otc stock apears to be less risky and, when comparing its historical volatility, Charlottes Web Holdings is 10.11 times less risky than Stem Holdings. The otc stock trades about -0.03 of its potential returns per unit of risk. The Stem Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2.00 in Stem Holdings on November 2, 2024 and sell it today you would lose (2.00) from holding Stem Holdings or give up 100.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charlottes Web Holdings vs. Stem Holdings
Performance |
| Timeline |
| Charlottes Web Holdings |
| Stem Holdings |
Charlottes Web and Stem Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charlottes Web and Stem Holdings
The main advantage of trading using opposite Charlottes Web and Stem Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charlottes Web position performs unexpectedly, Stem Holdings 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 Stem Holdings will offset losses from the drop in Stem Holdings' long position.| Charlottes Web vs. Verano Holdings Corp | Charlottes Web vs. Cresco Labs | Charlottes Web vs. AYR Strategies Class | Charlottes Web vs. Green Thumb Industries |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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