Correlation Between C21 Investments and Stem Holdings

Can any of the company-specific risk be diversified away by investing in both C21 Investments and Stem Holdings 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 C21 Investments and Stem Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between C21 Investments and Stem Holdings, you can compare the effects of market volatilities on C21 Investments and Stem Holdings 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 C21 Investments with a short position of Stem Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of C21 Investments and Stem Holdings.

Diversification Opportunities for C21 Investments and Stem Holdings

0.34

Correlation Coefficient

C21 Investments  Stem Holdings

Weak diversification

The 3 months correlation between C21 and Stem is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding C21 Investments and Stem Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Holdings and C21 Investments 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 C21 Investments are associated (or correlated) with Stem Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Holdings has no effect on the direction of C21 Investments i.e., C21 Investments and Stem Holdings go up and down completely randomly.

Pair Corralation between C21 Investments and Stem Holdings

Assuming the 90 days horizon C21 Investments is expected to generate 0.23 times more return on investment than Stem Holdings. However, C21 Investments is 4.41 times less risky than Stem Holdings. It trades about -0.13 of its potential returns per unit of risk. Stem Holdings is currently generating about -0.24 per unit of risk. If you would invest  21.00  in C21 Investments on October 8, 2024 and sell it today you would lose (3.00) from holding C21 Investments or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

C21 Investments  vs.  Stem Holdings

C21 Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days C21 Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, C21 Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Stem Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stem Holdings 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 primary indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with C21 Investments and Stem Holdings

The main advantage of trading using opposite C21 Investments and Stem Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if C21 Investments position performs unexpectedly, Stem Holdings 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 Stem Holdings will offset losses from the drop in Stem Holdings' long position.

The idea behind C21 Investments and Stem 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.