Correlation Between Benchmark Botanics and Indoor Harvest

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

By analyzing existing cross correlation between Benchmark Botanics and Indoor Harvest Corp, you can compare the effects of market volatilities on Benchmark Botanics and Indoor Harvest 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 Indoor Harvest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Benchmark Botanics and Indoor Harvest.

Diversification Opportunities for Benchmark Botanics and Indoor Harvest

0.0

Correlation Coefficient

Benchmark Botanics  Indoor Harvest

Pay attention - limited upside

The 3 months correlation between Benchmark and Indoor is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Botanics and Indoor Harvest Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indoor Harvest Corp 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 Indoor Harvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indoor Harvest Corp has no effect on the direction of Benchmark Botanics i.e., Benchmark Botanics and Indoor Harvest go up and down completely randomly.

Pair Corralation between Benchmark Botanics and Indoor Harvest

Assuming the 90 days horizon Benchmark Botanics is expected to under-perform the Indoor Harvest. But the pink sheet apears to be less risky and, when comparing its historical volatility, Benchmark Botanics is 1.9 times less risky than Indoor Harvest. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Indoor Harvest Corp is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Indoor Harvest Corp on November 29, 2024 and sell it today you would earn a total of  0.02  from holding Indoor Harvest Corp or generate 200.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Benchmark Botanics  vs.  Indoor Harvest Corp

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 March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Indoor Harvest Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Indoor Harvest Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Indoor Harvest exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Benchmark Botanics and Indoor Harvest

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

The idea behind Benchmark Botanics and Indoor Harvest Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.