Correlation Between Edible Garden and BLACK

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

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

Diversification Opportunities for Edible Garden and BLACK

-0.57

Correlation Coefficient

Edible Garden  BLACK

Excellent diversification

The 3 months correlation between Edible and BLACK is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Edible Garden AG and BLACK HILLS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLACK HILLS P and Edible Garden 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 Edible Garden AG are associated (or correlated) with BLACK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLACK HILLS P has no effect on the direction of Edible Garden i.e., Edible Garden and BLACK go up and down completely randomly.

Pair Corralation between Edible Garden and BLACK

Given the investment horizon of 90 days Edible Garden AG is expected to under-perform the BLACK. But the stock apears to be less risky and, when comparing its historical volatility, Edible Garden AG is 5.31 times less risky than BLACK. The stock trades about -0.08 of its potential returns per unit of risk. The BLACK HILLS P is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,700  in BLACK HILLS P on October 5, 2024 and sell it today you would earn a total of  42.00  from holding BLACK HILLS P or generate 0.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	82.77%
Values	Daily Returns

Edible Garden AG  vs.  BLACK HILLS P

Edible Garden AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Edible Garden AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Edible Garden disclosed solid returns over the last few months and may actually be approaching a breakup point.

BLACK HILLS P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BLACK HILLS P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BLACK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Edible Garden and BLACK

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

The idea behind Edible Garden AG and BLACK HILLS P 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.