Correlation Between HempAmericana and Real Brands

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

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

Diversification Opportunities for HempAmericana and Real Brands

-0.1

Correlation Coefficient

HempAmericana  Real Brands

Good diversification

The 3 months correlation between HempAmericana and Real is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding HempAmericana and Real Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Brands and HempAmericana 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 HempAmericana are associated (or correlated) with Real Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Brands has no effect on the direction of HempAmericana i.e., HempAmericana and Real Brands go up and down completely randomly.

Pair Corralation between HempAmericana and Real Brands

Given the investment horizon of 90 days HempAmericana is expected to generate 1.02 times more return on investment than Real Brands. However, HempAmericana is 1.02 times more volatile than Real Brands. It trades about 0.17 of its potential returns per unit of risk. Real Brands is currently generating about 0.16 per unit of risk. If you would invest  0.01  in HempAmericana on November 29, 2024 and sell it today you would earn a total of  0.00  from holding HempAmericana or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

HempAmericana  vs.  Real Brands

HempAmericana

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HempAmericana are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, HempAmericana reported solid returns over the last few months and may actually be approaching a breakup point.

Real Brands

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Real Brands are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental drivers, Real Brands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HempAmericana and Real Brands

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

The idea behind HempAmericana and Real Brands 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.