Correlation Between Aequus Pharmaceuticals and Charlottes Web

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

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

Diversification Opportunities for Aequus Pharmaceuticals and Charlottes Web

0.77

Correlation Coefficient

Aequus Pharmaceuticals  Charlottes Web

Poor diversification

The 3 months correlation between Aequus and Charlottes is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Aequus Pharmaceuticals 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 Aequus Pharmaceuticals 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 Aequus Pharmaceuticals 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 Aequus Pharmaceuticals i.e., Aequus Pharmaceuticals and Charlottes Web go up and down completely randomly.

Pair Corralation between Aequus Pharmaceuticals and Charlottes Web

Assuming the 90 days horizon Aequus Pharmaceuticals is expected to generate 1.87 times more return on investment than Charlottes Web. However, Aequus Pharmaceuticals is 1.87 times more volatile than Charlottes Web Holdings. It trades about 0.02 of its potential returns per unit of risk. Charlottes Web Holdings is currently generating about -0.03 per unit of risk. If you would invest  3.30  in Aequus Pharmaceuticals on October 11, 2024 and sell it today you would lose (2.60) from holding Aequus Pharmaceuticals or give up 78.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Aequus Pharmaceuticals  vs.  Charlottes Web Holdings

Aequus Pharmaceuticals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aequus Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Aequus Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite latest weak performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Aequus Pharmaceuticals and Charlottes Web

The main advantage of trading using opposite Aequus Pharmaceuticals and Charlottes Web positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aequus Pharmaceuticals 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 Aequus Pharmaceuticals 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 Global Correlations module to find global opportunities by holding instruments from different markets.