Correlation Between CLS Holdings and Benchmark Botanics

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

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

Diversification Opportunities for CLS Holdings and Benchmark Botanics

0.06

Correlation Coefficient

CLS Holdings  Benchmark Botanics

Significant diversification

The 3 months correlation between CLS and Benchmark is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding CLS Holdings USA and Benchmark Botanics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Botanics and CLS Holdings 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 CLS Holdings USA are associated (or correlated) with Benchmark Botanics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Botanics has no effect on the direction of CLS Holdings i.e., CLS Holdings and Benchmark Botanics go up and down completely randomly.

Pair Corralation between CLS Holdings and Benchmark Botanics

Given the investment horizon of 90 days CLS Holdings is expected to generate 1.38 times less return on investment than Benchmark Botanics. But when comparing it to its historical volatility, CLS Holdings USA is 2.31 times less risky than Benchmark Botanics. It trades about 0.05 of its potential returns per unit of risk. Benchmark Botanics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1.10  in Benchmark Botanics on December 2, 2024 and sell it today you would lose (1.10) from holding Benchmark Botanics or give up 100.0% of portfolio value over 90 days.

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

CLS Holdings USA  vs.  Benchmark Botanics

CLS Holdings USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days CLS Holdings USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CLS Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with CLS Holdings and Benchmark Botanics

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

The idea behind CLS Holdings USA and Benchmark Botanics 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.