Correlation Between Apple and Charlottes Web

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

By analyzing existing cross correlation between Apple Inc CDR and Charlottes Web Holdings, you can compare the effects of market volatilities on Apple and Charlottes Web 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 Apple with a short position of Charlottes Web. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Charlottes Web.

Diversification Opportunities for Apple and Charlottes Web

-0.83

Correlation Coefficient

Apple  Charlottes Web

Pay attention - limited upside

The 3 months correlation between Apple and Charlottes is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Charlottes Web Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charlottes Web Holdings and Apple 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 Apple Inc CDR are associated (or correlated) with Charlottes Web. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charlottes Web Holdings has no effect on the direction of Apple i.e., Apple and Charlottes Web go up and down completely randomly.

Pair Corralation between Apple and Charlottes Web

Assuming the 90 days trading horizon Apple Inc CDR is expected to under-perform the Charlottes Web. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc CDR is 6.69 times less risky than Charlottes Web. The stock trades about -0.03 of its potential returns per unit of risk. The Charlottes Web Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Charlottes Web Holdings on October 9, 2024 and sell it today you would earn a total of  1.00  from holding Charlottes Web Holdings or generate 6.25% return on investment over 90 days.

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

Apple Inc CDR  vs.  Charlottes Web Holdings

Apple Inc CDR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Charlottes Web Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charlottes Web Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Charlottes Web is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Apple and Charlottes Web

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

The idea behind Apple Inc CDR and Charlottes Web Holdings 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.