Correlation Between Brainsway and Cannabotech

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

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

Diversification Opportunities for Brainsway and Cannabotech

-0.82

Correlation Coefficient

Brainsway  Cannabotech

Pay attention - limited upside

The 3 months correlation between Brainsway and Cannabotech is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Brainsway and Cannabotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cannabotech and Brainsway 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 Brainsway are associated (or correlated) with Cannabotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cannabotech has no effect on the direction of Brainsway i.e., Brainsway and Cannabotech go up and down completely randomly.

Pair Corralation between Brainsway and Cannabotech

Assuming the 90 days trading horizon Brainsway is expected to generate 0.62 times more return on investment than Cannabotech. However, Brainsway is 1.62 times less risky than Cannabotech. It trades about 0.23 of its potential returns per unit of risk. Cannabotech is currently generating about -0.38 per unit of risk. If you would invest  138,500  in Brainsway on September 5, 2024 and sell it today you would earn a total of  49,500  from holding Brainsway or generate 35.74% return on investment over 90 days.

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

Brainsway  vs.  Cannabotech

Brainsway

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brainsway are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Brainsway sustained solid returns over the last few months and may actually be approaching a breakup point.

Cannabotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cannabotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Brainsway and Cannabotech

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

The idea behind Brainsway and Cannabotech 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.