Correlation Between Benchmark Botanics and BC Bud

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

By analyzing existing cross correlation between Benchmark Botanics and The BC Bud, you can compare the effects of market volatilities on Benchmark Botanics and BC Bud 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 Benchmark Botanics with a short position of BC Bud. Check out your portfolio center. Please also check ongoing floating volatility patterns of Benchmark Botanics and BC Bud.

Diversification Opportunities for Benchmark Botanics and BC Bud

0.39

Correlation Coefficient

Benchmark Botanics  BC Bud

Weak diversification

The 3 months correlation between Benchmark and BCBCF is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Botanics and The BC Bud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BC Bud and Benchmark Botanics 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 Benchmark Botanics are associated (or correlated) with BC Bud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BC Bud has no effect on the direction of Benchmark Botanics i.e., Benchmark Botanics and BC Bud go up and down completely randomly.

Pair Corralation between Benchmark Botanics and BC Bud

Assuming the 90 days horizon Benchmark Botanics is expected to under-perform the BC Bud. In addition to that, Benchmark Botanics is 1.13 times more volatile than The BC Bud. It trades about -0.13 of its total potential returns per unit of risk. The BC Bud is currently generating about 0.04 per unit of volatility. If you would invest  5.90  in The BC Bud on December 3, 2024 and sell it today you would lose (0.60) from holding The BC Bud or give up 10.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Benchmark Botanics  vs.  The BC Bud

Benchmark Botanics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Benchmark Botanics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BC Bud

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The BC Bud are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, BC Bud reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Benchmark Botanics and BC Bud

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

The idea behind Benchmark Botanics and The BC Bud 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.